In the last five years, fintech companies in India have improved access to financial services by solving several bottlenecks that existed within the Indian banking system. However, this rise of fintechs has been accompanied with concerns surrounding the implications on financial stability as well as data privacy and security, all of which require regulatory guidance and oversight. The Reserve Bank of India (RBI) on its part has been regulating the fintech space either through the Department of Payment and Settlement Systems when it comes to payments systems or through the Reserve Bank Information Technology Private Limited (REBIT) and Institute for Development and Research in Banking Technology in terms of technology aspects. For fintech lenders that are registered as non-banking financial companies (NBFCs), the RBI issues regulations routinely as it does for other NBFCs lenders under the Board for Financial Supervision. However, in March this year, RBI Governor Shaktikanta Das said that the RBI would be setting up an exclusive fintech department to focus digital transactions and adoption of technology across all aspects of banking and non-banking services, BloombergQuint reported. So what are the principles of fintech regulations that the RBI might follow? How is the fintech industry presently regulated? And what are the challenges for regulators? The need for regulation In its November 2020 Bulletin, the RBI published a paper titled FinTech: The Force of Creative Disruption, which said that while fintechs have helped enhance financial inclusion, a central bank's interest in regulating the industry would be based on its…
