The Working Group formed by RBI in 2021 acknowledges the potential that digital lending holds in the realm of finance. Digital lending has provided unique solutions and services in recent years. Moreover, it has also showcased the ability to hold the crowd together and promote the prowess of financial inclusiveness. However, recent announcements by RBI to bar Non Bank Prepaid Payment Instrument issuers (PPI) from loading the prepaid card using credit lines is a move that has intimidated the heavily funded Upstarts. Although it has momentarily caused some confusion in the financial ecosystem especially amongst Fintech startups, one needs to understand the vision and drive behind this move, which I think is in the right direction.
There was another news in recent times – ‘Finance Ministry recommends banks to collaborate with Upstarts to leverage their robust technology.’ While ostensibly, both reports seem to contradict the action taken, the intention behind it appears quite clear. With numerous Fintech startups joining the field for a play where regulations are still not entirely defined, the salient object of RBI in my opinion is to give the financial world a ground to play collaboratively for sustainable and inclusive growth.
Moreover, I think the Working Group understands the dire need for a robust revenue model for Fintech startups who are non necessarily regulated in equal terms as the banks. At the moment, some Fintech are operating in the grey area. However, given the nature of inevitable growth propelled by innovation, it cannot be left self regulated or unregulated and therefore defining a place for it in its nascent stage is absolute farsightedness by the RBI.
The Working Group set up by the RBI with the support of central legislations are more interested in calling out the bad hats rather than eliminating right spirited competition to the banks as suggested by a couple of news portals.
In my opinion, this is an attempt by the RBI to create healthy competition in the financial world where players work as a team to cater to the end customer rather than create business models that are based on regulatory arbitrage.