The Steering Committee on Fintech related issues constituted by the Ministry of Finance, Department of Economic Affairs submitted its Final Report to Union Finance & Corporate Affairs Minister Nirmala Sitharaman in her office in New Delhi.
The Committee was constituted in pursuance to the announcement made by the Union Minister of Finance and Corporate Affairs, Shri Arun Jaitley in his Budget Speech 2018-19 (Para 75). The report outlines the current landscape in the Fintech space globally and in India, studies the various issues relating to its development and makes recommendations focusing on how fintech can be leveraged to enhance financial inclusion of MSMEs with a view to making fintech related regulations more flexible and generate enhanced entrepreneurship. The Committee report also identifies application areas and use cases in Governance and financial services and suggests regulatory upgrades enabling fintech innovations.
The Committee has recommended that the RBI may consider development of a cash-flow based financing for MSMEs, development of an open-API MSME stack based on TReDS data validated by GSTN and a standardised and trusted e-invoice infrastructure designed around TREDS-GSTN integration.
It has also recommended that Insurance companies and lending agencies to be encouraged to use drone and remote sensing technology for crop area, damage and location assessments to support risk reduction in insurance/lending business.
Given the rapid pace at which technology is being adopted primarily by private sector financial services, the Committee recommends Department of Financial Services(DFS) to work with PSU banks to bring in more efficiency to their work and reduce fraud and security risks. Significant opportunities can be explored to increase the levels of automation using Artificial Intelligence (AI), cognitive analytics & machine learning in their back-end processes.
The Committee has highlighted the positive impact of Fintech innovations on sectors such as Agriculture and MSMEs. And it has recommended NABARD to take immediate steps to create a credit registry for farmers with special thrust for use of fintech along with core banking solutions (CBS) by agri-financial institutions, included Cooperative societies.
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The Committee recommends a special drive for modernisation and standardisation of land records by setting up a dedicated National Digital Land Records Mission based on a common National Land Records Standards with involvement of State Land and Registration departments, with a view to making available land ownership data on an online basis to Financial Institutions.
The Committee also recommends a comprehensive legal framework for consumer protection be put in place early keeping in mind the rise of fintech and digital services.
It has also recommended adoption of Regulation technology (or RegTech) by all financial sector regulators to develop standards and facilitate adoption by financial sector service providers to adopt use-cases making compliance with regulations easier, quicker and effective. Similarly, it has also recommended that financial sector regulators develop an institutional framework for specific use-cases of Supervisory technology (or SupTech), testing, deployment, monitoring and evaluation.
Further, an Inter-Ministerial Steering Committee will be set up on fintech Applications in Department of Economic Affairs (DEA), Ministry of Finance, to continue to carry on the tasks of implementing this report, including exploring and suggesting the potential applications in government financial processes and applications, particularly accounting and asset management, welfare services, taxation, and handling citizen grievances. While the Inter-Regulatory Technical Group (IRTG) set up under the FSDC will be the forum of inter-regulatory coordination on Fintech.
Following the deliberations of the Committee it was considered necessary to have a nodal agency to coordinate developments across Ministries and Regulators in the area of Fintech. A dedicated team on Digital Economy & Fintech is being set up in the Investment Division, Department of Economic Affairs, Ministry of Finance for coordination on FinTech with relevant Ministries.
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