Source : The Indian Express

Recommendations of inter-ministerial panel of fintech

  1. To use technology to promote financial sector growth, an inter-ministerial panel on fintech has recommended measures including the Reserve Bank of India examining issuance of ‘virtual banking licences’, dematerialisation of fixed deposits, sovereign gold
    bonds and post office certificates to promote easy transactions and collateral, and the central bank mandating banks to share crucial customer data after consent.
  1. In its report submitted to Finance Minister Nirmala Sitharaman, the panel also suggested putting in place a comprehensive legal framework to protect consumers of digital services.
  2. Banks are increasingly moving towards virtualisation of services. The Committee recommends that Department of Financial Services and RBI may examine the suitability of ‘virtual banking system’ in the Indian context, costs and benefits regarding allowing virtual banks and prepare for a possible future scenario where banks do not need to set up branches and yet deliver the full scale retail banking services ranging from extending loans, savings accounts, issuing cards and offering payment services through their app or website.

          The Hong Kong Monetary Authority (HKMA) has recently issued guidelines for setting up virtual banks and is examining applications for virtual banking licenses.

  1. The panel also recommended adoption of regulation technology (or RegTech) by all financial sector regulators to develop standards and facilitate adoption by financial service providers.
  1. It also suggested usage of fintech to improve access of financial products for MSMEs, farmers and poorer sections of the society.
  1. The panel has also recommended that insurance companies and lending agencies be encouraged to use drone and remote sensing technology for crop area, damage and location assessments to support risk reduction in insurance/lending business.
  1. Given the rapid pace at which technology is being adopted primarily by private sector financial services, the report said the Department of Financial Services (DFS) should work with PSU banks to bring in more efficiency to their work and reduce fraud and security risks.
  1. The committee also suggested digitisation of land records across the country on a war footing.

Administrative mechanism on fintech
The steering committee headed by the then Economic Affairs Secretary Subhash Chandra Garg was set up on fintech sector. Following the deliberations of the committee, it was considered necessary to have a nodal agency to coordinate developments across ministries and regulators in the area of financial technology (fintech). A dedicated team on digital economy and fintech is being set up in the Investment Division, Department of Economic Affairs for coordination on fintech with relevant ministries. The committee was constituted following the announcement made by the then Finance Minister ArunJaitley in Budget 2018-19.