Viewpoint: Fintech Regulations, Financial Stability, and Data Privacy in India: So, What Is the Path to Go Forward?
In a recent development, the Delhi High Court received a Public Interest Litigation (PIL) from an applied economist, Reshmi P Bhaskaran, seeking to regulate the entry and operations of ‘TechFin’ platforms. Inter alia, the PIL asked the High Court to help develop a regulatory framework around the TechFin industry, also popularly known as the FinTech domain. Since then, the High Court has sought replies from various stakeholders, including the Ministry of Law, Ministry of Finance, RBI, SEBI, and NPCI regarding this issue.
The crux of the matter is that non-regulated technology platforms extend financial services without complying with the legal needs that Financial Institutions (FIs) have to fulfill. FinTech platforms partner with existing entities and even enjoy access to the UPI ecosystem as third-party applications. It poses certain systemic risks relating to financial stability, citizen data, cybersecurity, and the end-customers at large (people and businesses) alongside others.
The absence of a dedicated regulatory framework also limits the true growth potential of FinTech platforms as they carry the mantle of financial inclusion. So, let us delve deeper into the challenges, regulations, and prospective solutions in this context.