wordpress blog stats
Connect with us

Hi, what are you looking for?

Our take: as Fintech firms allowed 100% FDI through automatic route, challenges for regulators

digital-payments-cmn

Fintech companies classified under “other financial services” will now be permitted 100% foreign direct investment (FDI) through the automatic route, as opposed to the approval route earlier, according to a Reserve Bank of India (RBI) notification. “Other financial services” includes activities which are regulated by any financial sector regulator  i.e the RBI, Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory and Development Authority (PFRDA), National Housing Bank (NHB) or any other financial sector regulator as may be notified by the Government. These companies will be subject to conditional requirements such as minimum capitalization as specified by other regulators.

Earlier, only non-banking finance companies (NBFCs) under 18 categories engaged in activities such as stock broking, investment advisory etc were permitted 100% FDI through the automatic route.

MediaNama’s take

The RBI and other regulatory authorities have an uphill task of trying to figure out which fintech companies fall under whose purview. Regulators will have to spell out explicit rules and come out with more detailed classification. Fintech companies operate in areas where regulation in unclear, and regulators need to update themselves on their activities and specify  what a particular company can and cannot do.

A great example of this was the RBI’s consultation paper the peer-to-peer (P2P) lending companies which sought to regulate them as NBFCs. It added that it took into consideration SEBI’s guidelines on crowd funding, and clarified that since P2P lending it is not a transaction where equity or debt is exchanged, it would come under the RBI’s ambit.

Another example: MobiKwik, which operates as a digital wallet, said that it is entering the lending space and the company is in the process of tying up with a number of NBFCs for the same. However, can a wallet company with a semi-closed PPI licence be permitted to take on lending operations and assume credit risks? Note that there is nothing wrong with MobiKwik diversifying into other spaces, but clarity of rules will help.

The RBI’s review of guidelines for prepaid payment instruments (PPIs) is welcome and it will be in interest of everyone to understand new developments in the fintech space. Other regulators would be wise to issue or clarify rules for developments in their sectors.

You May Also Like

News

The National Payments Corporation of India is in the process of rolling out a completely open source platform for the Unified Payments Interface (UPI)...

News

MobiKwik’s net revenues grew by 134% to ₹379 crore at the end of FY20 from ₹162 crore on the back of higher revenue from...

News

Non-bank lender Bajaj Finance is planning to enter the competitive Unified Payments Interface (UPI) market with its own third-party app called Bajaj Pay. The...

News

Digital payment adoption has grown significantly in the last year, reflecting a secular trend among Indian consumers and businesses, TR Ramachandran VISA Inc’s group...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2018 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to Daily Newsletter

    © 2008-2018 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ