RBI may bring fintech regulations soon: Dy governor Rabi Sankar

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

Reserve Bank of India (RBI) deputy governor T Rabi Sankar on July 7 said the central bank may bring regulations for the fintech companies after consultation with the industry.

He added that they are working on these regulations on these entities and ecosystem.

Currently, there are no regulations on fintech, but the central bank is talking to the industry to understand if there is any need to regulate them.

Sankar was speaking at the Moneycontrol Startup Conclave.

He also said the RBI cannot give any time line for release of these regulations.

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“We are working on fintech regulations what would be specific to these entities and ecosystem. Like I said we are also learning as much they are learning,” he said.

First we need to find out do we need to do it and what aspects we need to do it, he said. Whenever we will do it, it will be in close coordination with consultation from the industry.

Last month, the central bank has approved the First Loss Default Guarantee (FLDG) programme, a popular product that fintechs in the country use to form partnerships with banks and non-banking financial companies (NBFCs).

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The RBI had said in its Digital Lending Guidelines last year that it was not opposed to the idea of FLDG. This is the first time that the banking regulator has explicitly approved such a product. However, RBI has capped the FLDG amount at 5 percent of the total loan value.

“RE (Regulated Entity) shall ensure that the total amount of DLG cover on any outstanding portfolio which is specified upfront shall not exceed five percent of the amount of that loan portfolio. In case of implicit guarantee arrangements, the DLG Provider shall not bear performance risk of more than the equivalent amount of five per cent of the underlying loan portfolio,” RBI’s circular said.