NEW DELHI: A high-level panel on fintech has pitched for development of a marketplace model for peer-to-peer (P2P) lending, virtual banking to allow lenders to operate without branches, use of drones for field assessments and artificial intelligence (AI) to reduce frauds.The committee made wideranging recommendations in its report, including a review of the existing regulatory framework in the financial sector with respect to data protection and privacy concerns, in keeping with emerging data privacy legislation in India.The panel pitched for moving small savings schemes such as the National Savings Certificates to dematerialised format and extensive digitisation of land records.The committee recommended quickly putting in place a comprehensive legal framework for consumer protection, keeping in mind the rise of fintech and digital services.
Team on Digital Economy, Fintech“Fintech has the potential to play a big role in increasing access to finance,” the committee said in its report submitted to finance minister Nirmala Sitharaman on Monday.The government set up an inter-ministerial steering committee within the Department of Economic Affairs to implement the panel’s recommendations, according to an official statement.The committee had been constituted by then finance minister Arun Jaitley in his Budget speech 2018-19. The panel headed by the secretary in the Department of Economic Affairs and its members included senior officials from other departments, Reserve Bank of India and the Securities and Exchange Board of India.A dedicated team on digital economy and fintech is being set up in the finance ministry for coordination on fintech with relevant ministries, an official statement said.The committee recommended setting up of a taskforce in the finance ministry with the participation of regulators to make recommendations to safeguard the interests of consumers and enabling a positive climate for innovation in view of data privacy concerns.It said the finance ministry should develop a marketplace model of debt financing in India by reforming the present model of P2P lending platforms.“Potential hindrance in terms of restrictions on overall and individual exposure limits may be reviewed and options like allowing Mudra Bank to directly fund or co-fund SMEs and MSMEs through P2P platforms may also be examined as an alternative credit delivery channel,” it said.Digital paymentsOn digital payments, the committee said non-discriminatory access must be the norm unless a regulator clearly provides reasons for separate treatment to a specified category of financial firms. The committee asked the government and RBI to take steps to eliminate discrimination in access to payments infrastructure to non-banks vis-à-vis banks with a view to enhancing competition and innovation.The committee wants the Department of Financial Services and RBI to examine the suitability of virtual banking in the Indian context and the associated costs and benefits. They should prepare for a possible future scenario where banks do not need to set up branches and yet deliver full-scale retail services ranging from extending loans, operating savings accounts, issuing cards and offering payment services through their apps.The committee batted for wider acceptance and implementation of NDSAP (National Data Sharing and Accessibility Policy), making way for sharing of data generated by government agencies in real time through Open Application Programming Interface.It suggested setting up of a dedicated National Digital Land Records Mission to make available land ownership data online to financial institutions and use of artificial intelligence to reduce fraud and security risks in state-owned lenders.It advocated the use of drones by crop insurance companies for better and accurate assessments.The panel said financial sector regulators must develop standards and use-cases for RegTech or Regulation Technology by financial sector service providers to make compliance with regulations easier, quicker and more automated for regulated entities.
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