Banks should be certain that their rising reliance on fintech firms doesn’t lead to poor underwriting requirements and improper pricing of threat, cautioned M Rajeshwar Rao, deputy governor, Reserve Financial institution of India (RBI).
“The elevated reliance of banks and non-banking monetary firms to determine and onboard prospects via fintech companions mustn’t imply reducing underwriting requirements and improper pricing of dangers,” Rao mentioned on the Mint India Funding Summit on Saturday.
The deputy governor mentioned that the central financial institution is actively reviewing current fashions to establish how fintech collaborations can improve credit score supply with out compromising threat administration or prudential underwriting requirements.
“As a regulator and supervisors, we’re analyzing the prevailing fashions and practices to see how greatest we are able to leverage for efficient credit score supply with out compromising on threat administration and prudential credit score underwriting requirements,” he added.
In latest months, the RBI has intensified its oversight of bank-fintech partnerships. Paytm Funds Financial institution was directed to halt deposit acceptance after the central financial institution discovered inter-related social gathering transactions with its father or mother entity One97 Communications. Additionally, Federal Financial institution and South Indian Financial institution had been requested to stop issuing co-branded bank cards after it was found that the method of buyer acquisition through their fintech companions failed to stick to RBI requirements.
Regardless of these issues, Rao affirmed the RBI’s assist for accountable innovation however underscored the need of vigilance over the event and market influence of latest monetary options.
“Harmonization does not imply a uniform set of rules. It entails threat based mostly perspective whereby regulatory necessities are tailor-made to particular dangers related to every kind of monetary entity and exercise. The concept is that regulatory arbitrage needs to be by design and shouldn’t be an possibility exercised by regulated entity to to take benefit,” he added.
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Printed: 30 Mar 2024, 08:41 PM IST
Supply: Live Mint