As per the norms of RBI, every organization that includes financial activities should be registered and approved by RBI.

Due to this norm, Fintech also needs to be regulated by RBI. From setup to functioning, RBI declares the entire guideline for Fintech.

WHAT IS FINTECH AS PER RBI

The Financial Stability Board (FSB) defines FinTech as “technology-enabled innovation in financial services that could result in new business models, applications, processes or products with an associated material effect on the provision of financial services.”

According to section 45-IA of the RBI Act, no NBFC can initiate or carry on the business of a non-banking financial institution without obtaining the certificate of registration from RBI.

RBI INITAITIVES

RBI has established a separate department to regulate, monitor, and control Fintech in India. This department focuses on the followings:

1. Recognize the scope of Fintech
2. Identify the challenges
3. Find out new opportunities
4. Admire and helps to add innovations in the financial sector

REGULATIONS BY RBI

There is no particular regulation protocol or set of laws governing Fintech in India. However, RBI has multiple laws which apply to Fintech. A few significant laws are given below:

Payment and Settlement Systems Act (2007): 

According to this act, the initiation and operation of any ‘payment system’ in India’ should be authorised by RBI. Fund transfer, PPIs, and credit and debit card payments come in this category.

Guidelines regulating P2P Lending Platforms: 

In any P2P lending platform, all the lender exposure norms and borrowing limits in India should be fulfilling the regulations applied by the Peer-to-Peer Lending Platform Directions of 2017.

NCPI Regulations regarding UPI payments: 

The NCPI issued a guideline for UPI payments in India.

According to this, banks solely generate and manage money transfer services through UPI platforms. Banks can schedule technology providers to carry out the operation of UPI-based mobile apps. These apps should follow the eligibility criteria and prudential norms prescribed by the NCPI.

NBFC Regulations: 

All NBFCs of India are governed by the Reserve Bank of India as per the RBI Act of 1934. It states that any fintech in India must be registered by the RBI. According to section 45-IA of the RBI Act, all the operations of an NBFC come under the regulations of RBI.

Regulations governing Payment Banks: 

Section 22 of the Banking Regulations Act of 1949 states that payment banks are registered as private limited companies and licensed under this act. They are considered a bank but function on a smaller scale. They cannot provide loans or issue credit cards. Banks’ activities, especially for accepting demand deposits and payments and settlements, are restricted as per the specific licensing conditions.

Regulation of Payment Intermediaries by the RBI: 

This act regulates Electronic Payment Transactions Involving Intermediaries (“2009 EPT Directions”).

The RBI, in November 2009, under section 18 of the P&SS Act, clearly said that the Opening and Operation of Accounts and Settlement of Payments For Electronic Payment Transactions Involving Intermediaries (“2009 EPT Directions”) should be regulated by RBI.

The objective behind this is to safeguard the interests of the customers and to ensure that the payments made by them are duly accounted for by the intermediaries receiving such payments and remitted to the accounts of the merchants who have supplied the goods and services without undue delay.

CONCLUSION:

Fintech is a growing industry in India. Specific laws should be formed and implemented on Fintech so that all Fintech comes under one dome. Above mentioned individual laws are not good enough and capable of protecting the customer. The good part is that the Indian Government and Authorities are already working for the same.