Indian Fintech is quickly becoming a worldwide success story as the country moves toward a digital economy thanks to its dynamic policy environment and infrastructure. The industry has experienced rapid growth and valuation rise due to a thriving ecosystem and surge in digital adoption. Partnerships involving large incumbents, non-bank companies, emerging and established Fintechs, aggregators, and data and technology service providers will develop as a result of a dynamic transformation in the financial services industry as a whole.

In this write-up, we will analyze the recent development in the fast-growing digital economy in India.

RBI’s Vision Statement:

Reserve Bank of India’s (RBI) released the ‘Payments Vision 2025’ for India’s payments and settlement systems on 17th June, 2022. Under this vision, the RBI stated some key initiatives including establishing a Digital Payments Protection Fund, revising PPI guidelines, forming regulatory framework for unregulated payment intermediaries, examining the possibility of geotagging of online payment transactions, and releasing instructions for Buy Now Pay Later products etc.

Digital Lending:

In its press release on 10th August, 2022, the RBI has set out a regulatory stance on digital lending in India by entities such as banks, non-banking financial companies. According to the press release, digital lenders have been divided into three categories: (a) entities regulated by the RBI (b) entities authorized to carry out lending in accordance with other statutory provisions, but not by RBI (c) entities operating lending outside the purview of any statutory provisions.

Payment Systems:

  1. Limitations on credit lines being loaded into prepaid payment instruments produced by non-bank companies.
  2. New regulatory clearance and notification requirements influencing M&A in the regulated payments sector.
  3. Declaration of new regulatory application window for non-bank payment aggregator licenses.
  4. Restrictions in relation to storage of customer card details on payment service providers and merchants.

Cards, Digital banking and others:

  1. Introduction of new regulatory framework with respect to credit, debit, and co-branded cards.
  2. Digital baking units and the upcoming times.
  3. Regulatory conditions for appointment of recovery agents.

Online Bond Trading Platforms:

Securities and Exchange Board of India proposed a regulatory framework for India’s digital bond platforms by releasing its consultation paper on 21st July, 2022. SEBI is committed to bring regulatory framework in online bond platforms to address issues emerging out of circumstances like lack of regulatory supervision and answerability for the bond platform, non-existence of standards for KYC norms, vagueness in redressing grievances of investors, issues regarding deemed public issuances, and so forth.

To recapitulate, in order to improve a sector’s efficiency, productivity, scope, and competitiveness and consequently create a cutting-edge, high-tech digital economy, digitalization, or the digital transformation of the economy, entails the introduction of information and communication technology. The adoption of digital technologies across a range of economic sectors, including healthcare, education, housing, social services, manufacturing, and services, is quickly altering these businesses’ faces. To make sure that everyone is taken care of and that no one is left behind, digital transformation must be deliberately inclusive and properly developed and implemented.

-Kiranpreet Kaur

Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali


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