RBI working group to study regulatory issues in Fintech, Digital Banking

The Reserve Bank of India has set up an inter regulatory Working Group (WG) to study the entire gamut of regulatory issues relating to Fin Tech and Digital Banking in India. RBI’s financial stability and development council sub-committee had decided to set up such a working group in its meeting held in April this year.


The committee will look into and report on the “granular aspects of FinTech and its implications so as to review and appropriately reorient the regulatory framework and respond to the dynamics of the rapidly evolving Fin Tech scenario.”


The Committee is being headed by RBI ED Sudarshan Sen as chairman and includes representatives from other financial sector regulators like SEBI, IRDA, PFRDA; from intermediaries like NPCI; from RBI’s own think tank IDRBT, two banks and has a few RBI executives.


Deputy MD and CIO of State Bank of India, Mrutyunjay Mohapatra, is the only CIO in the committee while HDFC is represented by Head of its Digital Banking, Nitin Chugh.


The terms of reference of the Working Group will be as follows:

  1. To undertake a scoping exercise to gain a general understanding of the major Fin Tech innovations/developments, counterparties/entities, technology platforms involved and how markets, and the financial sector in particular, are adopting new delivery channels, products and technologies.
  2. To assess opportunities and risks arising for the financial system from digitisation and use of financial technology, and how these can be utilised for optimising financial product innovation and delivery to the benefit of users/customers and other stakeholders.
  3. To assess the implications and challenges for the various financial sector functions, such as intermediation, clearing and payments being taken up by non-financial entities.
  4. To examine cross country practices in the matter and to study models of successful regulatory responses to disruption across the globe.
  5. To chalk out appropriate regulatory response with a view to re-aligning/re-orienting regulatory guidelines and statutory provisions for enhancing Fin Tech/digital banking associated opportunities while simultaneously managing the evolving challenges and risk dimensions.
  6. Any other matter relevant to the above issues.


The Working Group will submit its report within six months from the date of its first meeting, according to a RBI statement.

While RBI has been quite proactive in general about embracing new technology changes, some definite steps were expected after the central bank’s June 2016 Financial Stability Report explicitly talked about technology as an ‘agathokakological’ challenge—a double-edged sword.


“Regulation in general should not be standing in the way of innovation as regulation is but an effort to enhance the upside of an innovation,” it said.


“Digitisation of data is providing a recipe for digital criminals who steal data and make money with the help of what is otherwise ‘non-public corporate information,’ it said identifying the challenges.


Acknowledging the ‘amazing customer experience’ that Fintechs have brought in, RBI warned against the possible technology related risks. “Increased levels of hacking threats and Distributed Denial of Service (DDoS) attacks have the potential for causing significant disruptions in the services of these ventures apart from risks related to sensitive customer information and cyber frauds,” it said.


The committee is expected to study these risks in detail. 

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