The best ecosystem for grow is the self-governance standards that can be prescribed and implemented through the SROs, said Ajay Kumar Choudhary, Executive Director, Reserve Bank of India on the third day to Global FIntech Fest 2023.
“Regulations may be proportionate or gradual, but the best system for the ecosystem to grow is self-governance standards, which can be prescribed and implemented through the SROs. They can play a very complimentary role,” he said.
The RBI ED said the Self Regulatory Organizations (SROs) can prescribe governance standards for the fintechs that can be the front for the regulator. “I believe together regulator and SROs can do wonderfully well and take this ecosystem further ahead,” he added.
It is to be noted that on Wednesday, the second day of the Global Fintech Fest 2023, RBI Governor has also urged fintechs to establish SROs themselves.
He further asked fintechs to discuss with the RBI over the formation of SROs.
“It will give opportunity to fintechs towards a better voice requirements and all aspects of regulation wont be burdened on the central bank as some aspects will be looked after by SROs,” he said in his speech.
In an affirmative voice, he expected that by the next edition of Global Fintech Fest, an SRO will be formed or maybe launched here. One year is the outer limit, it can be done before that also, he believed.
Also Read:RBI Governor urges FinTechs to form Self Regulatory Organisation by next year
Regulations: Rule based, principle based and outcome based
The RBI ED also said that the regulations can be rule based, principle based and outcome based. It needs to be in order from rule based to principle to outcome based.
“In any sphere sustainability can be achieved by balancing between the wants of future and needs of today. It can be achieved by putting right thrust on the right issues. People should be aware what’s important for sustainability of system, what risks they pose and how it can be mitigated,” he added.
In his speech, the RBI ED also highlighted the challenges of Fintech ecosystem and said the central bank has created a fintech department to deal with challenges and issues related to the fintech ecosystem.
Also Read: No silos between principle and rule based regulations, says FM Sitharaman
CBDC and frictionless credit public tech platform
Ajay Kumar Choudhary talked about the CBDC saying it is a digital form of Indian currency, a legal tender.
It comprises all features of currency, trust, store of value, instant settlements, etc. and additionally carries advantages of being digital. CBDC is a great motivation for most of the central bankers including RBI.
“For the large value remittances only 3-4 banks globally operate and these things aren’t good for global system and we need a counter system,” he said.
RBI ED believed that in the next 1 to 1.5 years, frictionless credit public tech platform will change the landscape of lending.
He narrated how it started with a survey in Karnataka and Tamil Nadu where cost incurred by farmers generally goes 5-6% for getting loan worth Rs 1 lakh with high turnaround time, and later how the central bank resolved it along with RBIH.
Later, the challenge was with the information residing in multiple spaces in disjoint manner making it very complex for lenders and Information providers, he said.
Looking at that we sat again with RBIH and then created a public tech platform, now lenders can connect to us on plug and play model, whatever information they require to complete the lending journey they obtained from the platform, he told.
Operational cost for lenders came down by 75% and for famers the cost of 5-6% has completely gone. The turnaround time also reduced to few minutes.
This platform we enabled for MSME loan, housing loan, dairy loan, etc on pilot basis. It is transformational.
