FinTech regulation should focus more on entities than activities: Vice Governor of the RBI

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As big tech players increasingly emerge as competitors to legacy banks, the Reserve Bank of India fought for lenders on Tuesday by claiming that banks are at the center of the payments system because they operate as a

gateway between depositors and borrowers.

Without naming the link between Google and Equitas to collect deposits, T Rabi Sankar, vice governor of the RBI, during a speech at the Global FinTech Fest, also said that entities other than banks are not allowed to process directly deposits.

“Banks are uniquely positioned to provide this service because they can create money and credit and thus act as providers of liquidity to the economy,” said T Rabi Sankar, vice-governor of RBI.

“Any fintech entity that provides such liquidity services functions effectively as a bank and should therefore be subject to the same legal, regulatory and supervisory regime to which a bank is subject. This is one of the reasons why in almost all countries, entities other than banks are not allowed to process deposits or similar deposits directly.

Sankar also said that FinTechs should be considered and partners of financial institutions.

“The ideal approach is for FinTech companies to be seen as facilitators and partners by banks or other financial institutions. Competition for banks does not come from FinTech companies but from other banks that make better use of FinTech, ”said the vice-governor.

Speaking on the need to regulate FinTech players, Sankar said regulation around FinTech should be more entity-based than activity-based,

“The approach to regulation must also adapt to the type of entity being regulated,” he said. “While similar activities should be regulated uniformly in most cases, such activity-based regulation may be less effective than entity-based regulation when it comes to activities. financial activities carried out by large technology companies. ”

Sankar also pointed out that cybersecurity

risks are likely to eclipse financial risks for all. The vice-governor also stressed that countries must overcome legislative and regulatory deficits to address concerns over data privacy, security and monetization.

Sankar also said regulations around data issues must adapt to a world where the lines between financial and non-financial businesses are becoming increasingly blurred.

“In many ways, regulation is the process of slowing down ever-changing value chains so that legislation has time to catch up,” said the vice governor.

“Slowing down the process of change can attract criticism that the regulator is stifling innovation, but it is often the best way to protect customers,” Rabi Sankar said in his speech.


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