The Government Forms Interministerial Committee to Address Fintech Industry Challenges
In a decisive move to support the burgeoning fintech sector, the government has established an interministerial committee aimed at tackling the regulatory hurdles currently plaguing the industry. This initiative follows years of encountering various regulatory obstacles that have hindered growth and innovation within the sector.
The newly formed committee comprises representatives from several key governmental bodies, including the Department of Financial Services, the Department of Economic Affairs, the Ministry of Electronics and Information Technologies (MEITY), the Department for Promotion of Industry and Internal Trade (DPIIT), the Reserve Bank of India, and the Securities and Exchange Board of India (SEBI). Founders from prominent fintech companies such as Billdesk, ACKO General Insurance, Groww, and Jupiter are also part of this initiative.
The committee has commenced its work by reviewing an order from the Department of Financial Services, dated March 17, and will analyze the growth trajectory of the fintech sector along with its contributions to the Banking, Financial Services, and Insurance (BFSI) industry. This comprehensive assessment aims to identify issues and challenges while monitoring the evolving regulatory landscape.
In January, the Ministry of Finance engaged in detailed discussions with representatives from the fintech industry, emphasizing the necessity to resolve the various regulatory challenges. These discussions highlighted the government’s desire to find a harmonious balance between fostering innovation and implementing appropriate regulations.
Faced with significant regulatory scrutiny, the fintech sector has experienced a downturn, particularly as startups in digital payments and lending have been affected by regulatory actions. The Reserve Bank of India (RBI) has implemented stricter regulations for payment aggregators like Razorpay and Cashfree, and has initiated measures to regulate the unmarked loans sector to curtail rampant growth.
The RBI clarified its position on peer-to-peer lending in August of the previous year, two years after introducing regulations that impose strict default provisions. These regulations have significantly impacted both regulated lenders and unregulated aggregators, highlighting the need for clear guidelines in the fintech ecosystem.
Despite the challenging regulatory environment, some venture capital funds are reassessing their investment strategies in the fintech space. A report from the TracxN data platform revealed that Indian fintech investments rose to $1.9 billion in 2024, a decline from $2.8 billion in 2023, indicating a cautious yet ongoing interest in the sector’s potential.
This new interministerial committee represents a proactive step towards enhancing the fintech industry’s regulatory framework, following a similar committee formed in 2019 under the leadership of former Economic Affairs Secretary Subhash Chandra Garg. With these efforts, the government aims to create a conducive environment where fintech can flourish, benefiting consumers and the economy at large.
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