The Fintech market in India is on an upward spiral and is exponentially rising like never before. According to NASSCOM, the fintech market in India will potentially touch up to $2.4 billion by 2020. So, keeping in mind, the lacunae existing in terms of legal framework for consumer protection, a committee was constituted to look into fintech related issues. The committee headed by Subhash Chandra Garg has finally submitted its report to Finance Minister Nirmala Sitharaman on Monday.
The report outlines many issues pertaining to fintech companies and also touched upon how they should strive for achieving financial inclusion of MSMEs.
The recommendations put forth by the committee are as follows: -
1. The Committee recommends that various options, including possibility of video-based KYC, making available validated electronic versions of KYC related documents through DigiLocker, making these available for verification by service providers with prior customer consent, may be considered early.
DigiLocker is a platform for issuance and verification of documents and certificates in a digital format, thereby eliminating the use of physical documents. Indian citizens who sign up for a DigiLocker account get a dedicated cloud storage space that is linked to their Aadhaar or Unique Identification Authority of India (UIDAI) number.
2. The panel recommends a special drive for modernisation and standardisation of land records by establishing a dedicated National Digital Land Records Mission based on a common National Land Records Standards with the involvement of State Land and Registration departments, to make available land ownership data on an online basis to Financial Institutions.
3. The panel also recommended that the Reserve Bank of India (RBI) may consider development of a cash-flow based financing for micro small and medium enterprises (MSME) development of an open-API MSME stack based on TReDS data validated by GSTN (GST Network) and a standardised and trusted e-invoice infrastructure designed around TReDS-GSTN integration.
4. 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 or lending business.
5. 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.
6. 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.
7. The Inter-Regulatory Technical Group (IRTG) set up under the FSDC will be the forum of inter-regulatory coordination on Fintech.