Fintech SROs to work consciously, consistently to create favourable conditions for competition, say RBI DG

Reserve Bank of India (RBI) deputy governor T. Rabi Sankar

The Reserve Bank of India (RBI) Deputy Governor T. Rabi Sankar on August 29 said that fintech Self-Regulatory Organisations (SROs) should work consciously and consistently to create conditions that are favourable to competition.

He further said that there are few things that an SRO needs to particularly focus on and one of them is this - that it needs to work consistently to create conditions that are favourable to competition.

“An important indicator of market integrity is price efficiency and one of the two major assets of the FinTech industry is cheaper cost, the other is faster delivery. But this cost efficiency should be driven by technology, not by an ability to withstand losses,” Sankar said during the session at Global Fintech Fest 2024.

New technology understandably has business strategies that are radically different from traditional businesses. But the industry has to ensure and therefore the SRO has to drive the industry to ensure that such strategies do not keep out competition, which eventually stifles innovation, Sankar added.

On August 28, the RBI has decided to recognise the Fintech Association for Consumer Empowerment (FACE) as Self-Regulatory Organisation in the FinTech Sector (SRO-FT).

Three applications for recognition as SRO-FT have been received. Each application was examined against the relevant requirements under the framework, said RBI.

Of the remaining two applications, one application has been returned with a provision for resubmission after meeting certain requirements. The third application is under examination, added RBI.

In May 2024, RBI came up with the final framework for establishing SROs in the fintech industry.

The SRO-FT (fintech) will operate "objectively, with credibility and responsibility" under the oversight of the central bank, and will work towards "healthy and sustainable development" of the sector, the rules said.

On the Central Bank Digital Currency (CBDC) front, Sankar said that clear use cases that are going to be established by programmable tokens, programmable CDDCs, this segment of the market can become as liquid or as heavy as any other segment.

“The possibilities (for programmability) are endless, what we are seeing here is just the beginning of some simple programs. But as the ecosystem develops, more and more programs are added, you can virtually program it for any specific use,” Sankar said at the sidelines of the event.

He further said that the central bank has not decided any timeline for the full-fledge launch of the CBDC.

“Like we have always been saying, as far as CBDCs are concerned, we would like to go at a pace at which we are comfortable that the system can absorb. So we don't have preset timelines or volume targets,” Sankar said.