The RBI MPC Meeting led to the regulator proposing to establish a repository of the Fintech sector for better policymaking and a cloud facility for Financial Institutions.
Key Highlights
- The RBI has proposed a cloud facility for the financial sector for enhanced security and integrity of data.
- The cloud facility would be set up by the Indian Financial Technology & Allied Services (IFTAS).
- The regulator also proposed a repository for the Fintech sector to be operationalised by April 2024.
The RBI in its MPC Meeting conference held on 8th December proposed to establish a repository of Fintech entities functioning in India to have a better understanding of developments in the Fintech ecosystem.
In its ‘Statement on Developmental and Regulatory Policies’, the regulator has mentioned that there is a need to provide for a repository to store essential information about the Fintech sector including its product offerings, technology stack, and activities among others.
The proposal comes amidst the rise of the Fintech sector and its rapid adoption of new-age technologies like Artificial Intelligence, Machine Learning, Distributed Ledger Technology (DLT), etc.
The Central Bank in its statement mentioned that the proposed repository is required to have information about the Fintech sector in order to formulate appropriate policies to support it.
The repository could be operationalised by April 2024 through the RBI Innovation Hub, as per the press release.
In addition, the RBI also proposed a cloud facility for the Financial sector in India to enhance the security and integrity of data. The facility would ensure business continuity amid disruptions and is expected to be scalable.
The proposed cloud facility would be set up by the Indian Financial Technology & Allied Services (IFTAS), which is a wholly-owned subsidiary of the RBI. However, the Central Bank has revealed its intention to eventually transfer this facility to an entity owned by the financial sector participants.
The Rise of the Fintech Sector in India
The Fintech Industry in India, which is the 3rd largest in the world has seen a proliferation of businesses leveraging the rapid digitalisation of the economy to offer financial services.
Incidentally, a report by Moody’s Analytics earlier this month had found out that Fintech and the Banking sector are leading the way when it comes to AI adoption.
With their proclivity to use alternative data to facilitate financing, a report by the research entity of the RBI had contended that lending through Fintechs could exceed lending through traditional banking by 2030.
However, the report also revealed that the growth of the industry is led by an increase in the demand for consumption-based personal loans.
This has put forth some questions about the business models adopted by some businesses after Banks nudged their Fintech partners to move away from small-ticket business loans.
The recent nudge came amidst the change in the norms for risk weightage for unsecured personal loans, which was a proactive step by the regulator to mitigate any potential risk to the financial system.
