Fintech sector voices concerns amid regulatory fears in meeting with FinMin

At a meeting with finance ministry’s bureaucrats on Tuesday, representatives of the fintech sector raised concerns about insufficient funding opportunities amid regulatory fears and negative sentiment surrounding the industry, according to sources in the know.  

 

“The fintech sector has expressed its concerns about declining investments, particularly from abroad, as the narrative around this sector has become less positive. However, fintech players also informed the government that the sector is growing well,” said a senior government official.

 

The meeting was chaired by Department of Financial Services secretary M. Nagaraju. Attendees included representatives from the Reserve Bank of India (RBI), the National Payments Corporation of India, Financial Intelligence Unit-India, the Ministry of Electronics and Information Technology, and around 60 founders and co-founders of various fintech companies and associations.

 

“No Budget-related issues were addressed in the meeting. Participants discussed what more could be done for the fintech industry. They include how UPI on credit could be opened for fintech and non-banking financial companies (NBFCs). It would allow them to distribute credit more effectively, particularly for small-ticket loans,” said a source present at the meeting.

 

The issue of cyber fraud was also discussed, with an emphasis on how it could be addressed in a more coordinated manner. “The meeting also explored how digital public infrastructure (DPI) could be elevated through initiatives like short deposit schemes. Overall, the discussions were centred round the ecosystem and what can be done, going forward,” the source added.

 

Nagaraju recognised the rapid growth of India's startup and fintech sectors, especially in the last 10 years. He pointed out that digital payment infrastructure plays a crucial role in the fintech industry's expansion, highlighting the need to improve digital payment systems in rural and Northeastern regions. This would be particularly through UPI.

 

He further noted that the government has undertaken various initiatives to create an enabling environment for fintech companies.

 

Aadhaar, UPI, and Aadhaar-enabled payments, among others, have acted as enablers for the fintech sector.

 

Similarly, initiatives such as the regulatory sandbox, fintech repository, and self-regulatory organisation (SRO) framework for fintechs have facilitated the fintech ecosystem in India.

 

The RBI officials also informed that various initiatives have been taken on their part, including the development of an emerging tech and fintech repository to capture baseline information in a secure and confidential manner.

 

They launched the Unified Lending Interface (ULI) and urged NBFCs to onboard the platform.

 

The RBI is conducting regular interactions with the fintech ecosystem and is also working on video-based KYC projects within their regulatory sandbox framework.

 

After a prolonged funding winter, the Indian fintech ecosystem is showing signs of recovery. The sector recorded a 66 per cent year-on-year growth in funding to $778 million in the third quarter of calendar year 2024 (Q3CY24). The sector raised $471 million in Q3 of 2023, according to data from market intelligence platform Tracxn.