Use digital for efficiency, not undue risks: RBI

Mumbai, Sep 3, 2024

The RBI fosters digital technologies for inclusion and improved customer experience. However, it intervenes when digital lending creates risks or complex structures. Deputy Governor Swaminathan J highlighted issues with peer-to-peer lending practices at a recent banking summit in Mumbai, urging the industry to view regulations as partnerships for a stable financial ecosystem.

RBI promotes digital technologies for inclusion, cost efficiency, innovation, and improved customer experience, while it intervenes when digital lending raises risks, creates complex structures, or enables aggressive practices such as intrusive data collection, the central bank's deputy governor Swaminathan J said.

"It is disheartening to see innovative misinterpretation of regulations.

A recent case in point is that of peer-to-peer lending regulations. The regulations, as originally conceived, envisaged the platforms to function like online marketplaces connecting lenders with borrowers, with no credit risk borne by the platform and no co-mingling or retention of funds," said Swaminathan. "However, the supervisory findings over the last one year revealed that some of these platforms adopted practices which were violative of both the letter and spirit of the regulations," he added.

Swaminathan said that RBI has been supporting digital innovation by launching regulatory sandboxes, organising global hackathons, and establishing the Reserve Bank Innovation Hub to advance digital financial solutions. He was speaking at a banking summit organised by CNBC TV18 in Mumbai.

"Rather than viewing regulators as disruptors, I would urge the industry to see the regulator as a partner towards a stable and prosperous financial ecosystem. It is therefore essential to appreciate the intent behind regulations, which are designed to protect customers, ensure fairness, and maintain stability," Swaminathan said.

[The Times of India]