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There is no sure way to regulate the fintech sector; Duty to act in a balanced manner on operators: RBI Executive Director Ajay Chowdhury

The RBI executive director said sector entities should have the right intentions while coming out with offers and strong governance for orderly growth of the sector.

The RBI executive director said sector entities should have the right intentions while coming out with offers and strong governance for orderly growth of the sector.

Reserve Bank of India Executive Director Ajay Chowdhury said on September 22 that there is no “certain way” to regulate fintech players and made it clear that the onus is on such firms to act in a balanced manner.

He said the entities of the sector should have right intentions while coming out with offers and strong governance for orderly growth of the sector.

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Speaking at the Global FinTech Fest in Mumbai, Mr Chaudhary said, “There is no sure way to regulate fintechs in a way that maximizes their positive impact while protecting the financial system and consumers from risk.”

“If the goal is to protect and further the interests of consumers and the orderly development of the financial system, the great balancing act actor has to be the fintech sector itself,” he said.

“I believe whether in life or business, balance comes from focusing on the right things. In my opinion it cannot come from regulation alone. Regulation can only be a supporting element when fintechs themselves have to execute the great balancing act,” he added.

Mr Chaudhary said he would direct fintech players to focus on customer centricity and governance and not see the latter as mere compliance.

The comments come at a time when the RBI is increasing its focus on the fintech sector and the recently released guidelines on digital transaction apps have created jitters with some agencies expressing concern.

Earlier, Mr Chaudhary said that the key role of regulators is to find a balance and added that sustainability is balancing today’s needs with future needs.

Acknowledging that there is currently a technology-based transformation going on around the world and the contribution of fintech is tremendous and gratifying, Mr. “We also have to be aware of the risks and keep the financial system safe,” Chowdhury said.

“We are working to create an appropriate framework for developing the fintech ecosystem to ensure innovation is balanced with the stability of the financial system,” he said.

He said fintech players must avoid harming customers, refrain from making unreasonable loans, avoid discriminatory or discriminatory outcomes, minimize adverse outcomes, manage financial integrity and customer experience.

“An entity must strive to be transparent and creating and sharing key information statements with customers will be a key aspect for customers moving forward,” he added.

He said the participation of technology companies in the financial sector, both as technology service providers as well as financial services providers, has created an additional regulatory objective of competition.

Mr Chowdhury also said that a pilot project to reduce the time taken by farmers for a Kishan Credit Card (KCC) loan from the current 3-4 weeks to a few minutes courtesy of automation tools.

“The pilot is being conducted in Tamil Nadu and Madhya Pradesh through integration of automation and data providers,” he said.

“From loan application to loan disbursement of up to ₹1.6 lakh at KCC can be done within minutes, compared to earlier processing of 3-4 weeks,” said Mr Chowdhury.

“We have simply integrated and accordingly we have tried to link it with all the data provided so that credit can flow seamlessly,” he said.

Mr Chowdhury said the pilot, if successful, would reduce costs, improve timing and improve the customer experience. All it takes to make such a project work is the integration of “small pieces” at the bank, but the same thing hasn’t happened in “many years,” he said.

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