Meet every month to ensure compliance, voice concerns, FinMin tells fintech firms, regulators
The thrust of the meeting was unambiguous – there were momentous gaps in compliance as well as gaps in the communication between the regulator and the fintech firms that needs to be bridged
On the day when the chairman of Paytm Payments Back, Vijay Shekhar Sharma, stepped down from the board of the beleaguered organisation, Union finance minister Nirmala Sitharaman held a meeting with the fintech and regulatory bodies and instructed the latter to hold meetings with startups and fintech firms every month with the twin objectives of enforcing compliance as well as hearing out their concerns. The thrust of the meeting was unambiguous – there were momentous gaps in compliance as well as gaps in the communication between the regulator and the fintech firms.
The meeting with the chief of the organisation came 26 days after the dramatic regulatory action of the Reserve Bank against Paytm Payments Bank.
Among the senior faces in the banking industry who attended the meeting were State Bank of India chairman Dinesh Khara and RBI deputy governor T Rabi Sankar. Senior representatives of the National Payment Corporation of India (NPCI) were also present.
Following the meeting, the finance ministry set forth six action points. The salient points included simplification and digitisation of KYC applicable to all fintech segments and the need for regular interaction with regulatory bodies so that fintech firms could voice their concerns.
“RBI, DPIIT (Department for Promotion of Industry and Internal Trade) and MoF (ministry of finance) to look at the change of ownership holding/control of listed fintech companies to enable them to be in sync with regulatory compliance,” according to the statement issued by the finance ministry. The statement also said that the new Digital India Act would take care of the menace of cybercrime in this domain.
“Sitharaman exhorted the regulators, including RBI, that they may hold meetings via virtual mode once a month to discuss any questions, queries or concerns of the startups and fintech companies,” the ministry said in the statement.
The latest turmoil in the fintech space was triggered when, on January 31, RBI set a deadline of February 29 for Paytm Payments Bank and instructed it to stop accepting deposits, credit transactions, prepaid instruments, wallets, FASTags, and National Common Mobility Cards beyond that date. Later, the regulator relaxed the deadline till March 15, which now stands.
This action raised the hackles of the industry that wrote to the government which made it clear that compliance was a non-negotiable matter and the fintech firms have to comply with the regulator set out for them.
In the meeting that took place on February 26, the finance minister mentioned that India’s fintech space is the third largest in the world and growing at 14% CAGR. “The number of startups in India have grown significantly from just over 300 in 2016 to over 1.17 lakh in 2023 as recognised by DPIIT, generating more than 12.4 lakh jobs, and 47% of the startups have at least one women director,” the statement noted.
“DFS will conduct a day-long workshop with Law Enforcement Agencies (LEAs) wherein fintech ecosystem partners can voice their issues or concerns,” the ministry said.
“One major topic that was raised by the industry was about common KYC for fintechs. The ministry was receptive to the suggestions made by the participants and asked the industry to send a letter for the government to take it up,” a fintech executive told The Economic Times.
Other issues raised by the fintech firms included operational matters such as KYC administration, issues concerned with the digital personal data protection bill and GST matters, reported the newspaper.