Reserve Bank of India (RBI) Governor Shaktikanta Das said on Friday that the central bank will soon issue guidelines and measures digital lending Secure the ecosystem while enhancing customer security and encouraging innovation. He added that increasing use of technology and digital services has led to more incidents of digital frauds and customer dissatisfaction.
He also said that the recommendations of the RBI Working Group on Digital Lending are being examined for issuance of guidelines. “We have recently constituted a committee to review customer service standards in RBI regulated entities (REs), which will, inter alia, review the evolving and evolving needs of the customer service landscape, specially developed in the context of digital financial products and their distribution, and to suggest measures to strengthen the overall consumer protection framework.”
He added that the need for fintech regulation stems from the challenges they pose to the financial system and the new risks they take. These risks have an impact on overall financial stability and market integrity.
He was speaking at an event organized by Financial Express on the topic ‘Disruptions and Opportunities in the Financial Sector’.
Feather new age technologieshe said, “When it comes to technology, it can cross regulatory or national boundaries. The most relevant example in this case would be blockchain technology. Different blockchain platforms cannot be limited to a single regulator or nation.”
He added that another example could be the case of de-centralized finance (DeFi) in which financial applications are processed on a blockchain with limited or no involvement of centralized intermediaries. DeFi presents unique challenges to regulators as its anonymity, lack of a centralized governance body, and legal uncertainties can render traditional approaches to regulation ineffective. Therefore, there is a case for a globally coordinated regulatory approach and inter-regulatory coordination to comprehensively assess such activities and mitigate their risks.
Das said the regulatory approach of RBI has been re-implemented to support and promote innovations. Regulatory guidelines for account aggregators and peer-to-peer lending operators are indicative of a proactive regulatory approach.
“An enabling framework for a regulatory sandbox has been in place for the past three years. Reserve Bank Innovation Hub (RBIH) has also been set up by RBI to catalyze innovations in the fintech sector. We are now working on a central bank digital currency (CBDC) Heading towards the beginning,” said the RBI governor.
On loan recovery methods, he said another area that is attracting the RBI’s attention is the harsh recovery methods used by some lenders, without adequate checks and controls on their recovery agents.
“We have received complaints of recovery agents approaching customers, even after midnight. There are also complaints of the recovery agents using abusive language. Such action by recovery agents is unacceptable and poses a reputation risk to the financial institutions themselves,” Das said.
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