Focus on governance, business conduct, data protection: RBI governor to fintechs

At a meeting with select fintech firm, Das reiterated that the RBI would continue to adopt a participative and consultative approach to facilitate innovations in the financial sector.

The meeting was also attended by MK Jain, RBI’s deputy governor, and a few other senior officials.

Highlighting the importance of fintech initiatives and startups in India, Das said: “They are playing a transformative role in the financial system through digital innovations and innovative means of delivery of financial services.”
He asked the participants for their inputs and suggestions to enhance and deepen the role of fintech firms in India’s financial ecosystem.

We reported on August 12 that
the RBI’s new digital lending guidelines have stepped up pressure on new-age lending businesses, forcing them to focus on their non-banking financial company (NBFC) units and book building, the new rules give more importance to regulated entities.

Discover the stories of your interest

According to the
RBI’s digital lending norms, the disbursal of loans and collection of repayments must be executed only between borrowers and entities it regulates, with no third party involved in this process.

Further, any fees payable to a loan service provider are to be collected by the regulated entity directly from the borrower. This has made clear that RBI is keen on encouraging those licensed entities that it can govern.

“The biggest interpretation is that FLDG (first loss default guarantee) is for only those who have an NBFC. In case you don’t have an NBFC, it is going to be difficult for these fintech entities to participate in the risk-taking process as even regulated entities will start pulling out of such arrangements,” a fintech firm’s founder told ET. FLDG is an arrangement between a fintech company and regulated entity (RE), including banks and NBFCs, under which the fintech firm compensates the RE to a certain extent if the borrower defaults.

The new guidelines will focus on the revival of the digital NBFC and lead to more capital raising from lending startups, this person said.

While the RBI guidelines give a relative advantage to lending fintech firms with an active NBFC licence, it will be a painstaking effort to build the required capitalisation to lend further.

“The digital lending guidelines have taken the sheen off technology innovation that platform-lenders were providing and put the focus on NBFCs and regulated entities,” the founder of another digital lending firm, who didn’t wish to be named, told ET.