RBI’s clear message to industry - Shape Up!
The Reserve Bank of India has been coming down hard recently on what it sees as falling compliance standards - the list of orders include giving Paytm Payments Bank effectively a month to close business, barring IIFL Finance from issuing gold loans, restricting Visa on certain commercial business-to-business credit card transactions, and now reportedly also looking to stop peer-to-peer (P2P) credit card payments made via third-party service providers i.e fintech. The most recent order against JM Financial Products preventing any form of financing against shares and debentures, including against IPOs, was in collaboration with SEBI where the two regulators cracked down on what has been described as a “sharp, yet common practice” - read Sugata Ghosh for more on this.
If all the actions and orders aren’t enough to send the message, the RBI Governor has been crystal clear and two points stand out in a recent interview – first, the RBI is committed to enforcing the rules “There are regulations, there are rules of the game and you have to follow the rules of the game” and secondly, the regulatory architecture has been overhauled, “we have deepened our supervisory processes and approaches and we are now keeping a very close watch on activities of not only sectoral, sub-sectoral activities but also we are monitoring the activities” of large individual banks and NBFCs.
To be fair, the regulator has not been working in isolation and just issuing orders. While there has been increased scrutiny of fintechs, the RBI has reportedly held more than 200 meetings with fintech over the past six months and fintech companies are now taking a serious relook at corporate governance.
So all in all, the regulator wants to encourage innovation in a stable and healthy financial sector, and yes, this does mean that the industry has to shape up and sharp and lax market practices will be called out.
Our two must-read pieces this month highlight two vulnerable segments that need more focused attention from the industry : a) Soumya Bhowmick at the Observer Research Foundation looks at the case for savings products for women in India. While more than half of the Jan Dhan accounts are owned by women, there is not sufficient emphasis on using this network to enhance their savings and other financial products; and b) A new study by MicroSave Consulting examines the risks that informal workers and MSMEs face with regard to extreme heat. The survey conducted in the Delhi- NCR region looked at the impact and coping strategies, as well as the challenges to coping along three critical areas of health, livelihoods, and infrastructure and the response of the government.
Do read more news and views in our curated list below. Please also follow our Indicus Centre for Financial Inclusion page on Linkedin to continue the conversation.
Raymond Munene does an interesting analysis of India's UPI and Kenya's MPESA.
At the Annual Conference of RBI Ombudsman, March 15, 2024, Mumbai, Shri Shaktikanta Das, RBI Governor elaborated on the Reserve Bank’s overall approach in dealing with issues related to consumer protection and its expectations from the regulated entities.
Sarvjeet Singh Virk, Finvasia, looks at the new narratives in financial inclusion where action is expanding beyond Tier 1 cities.
Maria Fernandez-Vidal and Dean Claire, CGAP, put together a guide showing that a disaggregated gender analysis of a loan portfolio can unveil potential gender-intentional strategies to grow both the total loan book and the share of women borrowers without increasing the portfolio’s credit risk.
A joint report by Experian India and the Digital Lenders Association of India (DLAI) shows fintech companies in the country have seen an uptick in the volume and value of small-ticket loans disbursed over the past six years.
The Reserve Bank of India (RBI) issued a notification directing banks to provide an option to their customers to choose from multiple card networks at the time of issue and renewal of cards.
Dinesh Unnikrishnan at Moneycontrol.com writes on the Reserve Bank of India recent orders and actions on NBFCs, fintechs, and credit card issuers.
Disha Bhavnani and Rutuja Jadhav, MicroSave Consulting (MSC), examine the challenges faced by women-led businesses and how local knowledge networks through innovative tech solutions can support their expansion.
Shereen Bhan and Sapna Das, CNBC-TV18, look at the latest initiative from the government where India is planning to enforce uniform Know Your Customer (KYC) norms across the financial sector which will be graded based on the risk profile of a customer or entity.
Payments Council of India urged the government to amend laws and protect startups and payment aggregators from Google's monopolistic policies.
Wendy Chamberlin, Daryl Collins, Graham A N Wright and Peter Zetterli have a three -part blog series to share findings from research by CGAP, Decodis and MicroSave Consulting on how people living in poverty in Nigeria and Bangladesh are preparing for, coping with, and adapting to climate shocks, and what role financial services are playing in supporting them – Part 1, Part 2 and Part 3.
RBI released the “Draft guidelines on Disclosure framework on Climate-related Financial Risks, 2024” for public feedback by April 30, 2024.
Om Marathe, Jayati Sharma and Sahil Deo, CPC Analytics, examine and explain how digital payments through UPI and Pix are boosting financial inclusion in India and Brazil.
RBI issued FAQs for customers with regard to the action on Paytm Payments Bank.
C S Mohapatra, NCAER sets out a strategy to boost Jan Dhan account activity.
Tatiana Alonso and Diana Dezso, CGAP, have authored a comprehensive paper "Supply-Side Gender Disaggregated Data for Advancing Financial Inclusion: Insights and Areas for Further Research", which serves as a guide with lessons learnt so far, identifies existing gaps, and proposes next steps for future work to unlock S-GDD’s potential to support women’s financial inclusion and economic empowerment.
A report by Fintech Association for Consumer Empowerment (FACE) brings out data on fintech loans for the first half of 2023-24.
Lalitagauri Kulkarni looks at the larger concern about the raison d’être of payments banks and whether Paytm and counterparts meet the goals that led to their establishment.
Suprita Anupam, Inc42 Media, has a must read comprehensive report on regulatory action on fintech and brings together reactions from various stakeholders on the implications of the Reserve Bank of India (RBI) action on Paytm Payments Bank.