The preferred approach for prudent regulation of the ever-growing fintech sector should be self-regulation, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday.
Speaking at the Global Fintech Fest in Mumbai, the RBI Governor said a sustainable and orderly development of the fintech sector would require an appropriate balance between innovation and prudence.
RBI governor believes that a preferred approach for achieving balance between innovation and prudent regulation involves self-regulation.
"Self-Regulatory Organisations (SROs), comprising industry participants and having a good understanding of the sector's unique challenges and opportunities, would be in a position to give appropriate suggestions to the Regulators on regulations that are both practical and effective," Das told the gathering.
Shaktikanta Das said that out of the three applications for recognition as SRO-FT received by the regulator, RBI decided to recognise the Fintech Association for Consumer Empowerment (FACE) as an SRO-FT.
Of the remaining two applications, one application has been returned with a provision for resubmission after meeting certain requirements.
The third application is still under examination.
Through regular consultations, feedback mechanisms, and policy dialogues, the SROs would facilitate open communication and enable fintechs to stay informed about regulatory expectations and priorities.
Payments through digital means
Talking about Unified Payment Interface UPI, Governor Das said UPI is a key innovation that is driving India's fintech sector. Payments through digital means in India are hitting fresh highs, as its citizens are increasingly adopting the emerging modes of transactions on the internet.
A key emphasis of the government has been on ensuring that the benefits of UPI are not limited to India only; other countries, too, benefit from it.
During the address, the RBI governor spoke on five key policy priorities for the fintech sector -- Digital Financial Inclusion, Digital Public Infrastructure, Consumer Protection and Cyber Security, Sustainable Finance, and Global Integration and Cooperation.
Going forward, Das said strengthening financial infrastructure, including cross-border payment systems, will be key focus areas.
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"India, with its tech talent and evolved fintech ecosystem, holds the potential to serve as a global hub for digital innovation and fintech startups," he added.
"Based on the encouraging response we have received from several jurisdictions, we are now focusing on making the UPI and RuPay truly global." The deployment of UPI-like infrastructure in foreign jurisdictions, facilitating QR code-based payment acceptance through UPI apps at international merchant locations, and interlinking UPI with Fast Payment Systems (FPS) of other countries for cross-border remittances are on top of the RBI agenda.
India's Central Banks Digital Currency or CBDC, which is at a pilot stage, is another example of possible international cooperation.
"While we have successfully demonstrated the interoperability of central bank digital currency (CBDC) with retail fast payment systems like UPI, we continue to gain from our experimentation on off-line solutions. As we make progress, we would be happy to cooperate with other nations in their CBDC efforts," Das said.
