Banks, NBFCs must uphold standards with Fintechs: RBI Dy Governor D G Rao

The underwriting standards and pricing of risk of banks and Non-Banking Financial Companies (NBFCs) should not be affected while onboarding customers through fintech partners, noted M Rajeshwar Rao, Deputy Governor of the Reserve Bank of India (RBI).

In a speech delivered at the India Investment Summit & Awards organised by Mint on March 30, the deputy governor said, “The increased reliance of banks or Non-Banking Financial Company (NBFCs) to identify and onboard borrowers through fintech partners should not mean lowering of underwriting standards and improper pricing of risks.” The speech was uploaded on the RBI website on Tuesday.

Rao said that as a regulator and supervisor, RBI is examining the existing models and practices to identify the best ways in which these can be leveraged for effective credit delivery, without compromising on risk management and prudential credit underwriting standards.

He said despite the innovation in the financial services space, there is a need to be alert to the possibilities that the new entrants into the space, like fintech firms, could alter the universe of financial services providers significantly.

This change could affect the degree of market concentration and competition, giving rise to new challenges.

Further, he said that as the regulator of an evolving financial landscape with different types of financial institutions, RBI needs to remain alert to the new ideas and trends emerging in the markets along with trying to understand their scale in order to assess their potential to disrupt the market and consider interventions whenever necessary.