In order to promote innovation in FinTech space, Reserve Bank of India (RBI) Governor Shaktikanta Das has said the central bank will issue guidelines for setting up a regulatory sandbox or innovation hub for the fintech startups in the next two months. He noted that a regulatory sandbox will help FinTech firms to launch innovative products at a lower cost and in less time. He also explained that a regulatory sandbox is a framework set up by a regulator that allows FinTech startups to conduct live experiments in a controlled environment under supervision.
Observing that FinTech has the potential to reshape the financial services and financial inclusion landscape in India in fundamental ways, Das said that it can reduce costs and improve access and quality of financial services. He also said “we have to strike a subtle balance between effectively utilising FinTech while minimising its systemic impacts.” He stated that the RBI has encouraged banks to explore the possibility of establishing new alliances with FinTech firms as it could be pivotal in accelerating the agenda of financial inclusion through innovation. Adding further, he said that it is essential that flow of investments to this sector is unimpeded to realise its full potential. He also said that it is imperative to create an ecosystem which promotes collaboration while carefully paying attention to the implications that it has for the macro economy.
Pointing out some of the challenges, the RBI governor said that risks for FinTech products may also arise from cross border legal and regulatory issues. He also said that data confidentiality and customer protection are major areas that also need to be addressed. Emphasizing that India has been at the forefront of this revolution, he said, a recent global survey ranks India second in terms of FinTech adoption, with an adoption rate of 52 percent. He added that there are as many as 1,218 FinTech firms operating in India which have created a large number of jobs and have generated a healthy appetite for investment.