Smt. Sitharaman asks regulators to hold monthly meeting with startups and fintech firms to address their issues and concerns

DFS to ensure simplification and digitisation of KYC across all fintech segments

Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman chaired a meeting with Start-up and FinTech Ecosystem Entities, in New Delhi.

The meeting was also attended by Union Minister of State for FinanceDr Bhagwat Kishanrao Karad; Dr Vivek Joshi, Secretary, Department of Financial Services (DFS); Shri Rajesh Kumar Singh, Secretary, Department for Promotion of Industry and Internal Trade (DPIIT); Shri S. Krishnan, Secretary, Ministry of Electronics and Information Technology (MeitY); Shri. T. Rabi Sankar, Deputy Governor, Reserve Bank of India (RBI); Founders/Co-Founders/MDs/CEOs/Heads of various Start-ups and Fintech companies and various Associations such as Fintech Association for Consumer Empowerment (FACE), Digital Lenders’ Association of India (DLAI), Payment Council of India (PCI), and Fintech Convergence Council (FCC).

The interaction with the Start-up and Fintech ecosystem partners was organised to enable free exchange of ideas to bolster and scale upoperations to facilitate global competitiveness by enabling growth in the Fintech sector. India has approximately 10,244 Fintech entities, which is 3rd largest in the world.

The Union Finance Minister noted the rapid growth of the Start-up and Fintech sector of India, especially in the last decade, and welcomed suggestions from the FinTech leaders to achieve greater Easeof Doing Business and Ease of Living for consumers.

During the deliberations, Smt. Sitharaman exhorted the regulators, including RBI, that they may hold meetings via virtual mode once a month to discuss any questions/queries/concerns of the startups and fintech companies.

During the meeting, it was emphasised that innovative solutions by the Fintech companies are essential to the financial services sector while ensuring strict compliance with regulations.

It was noted that Aadhar, UPI, API Setu among others have acted as enablers for Start Up and FinTech organisations and simplified incorporation of companies, recognition of P2P Lenders as Non-Banking Financial Companies (NBFCs), regulatory sandbox, Fintech repository, SRO Framework for Fintech, etc have facilitated the startup eco-system in India.

The startup and fintech entities appreciated the processes, regulations and efficacy of GIFT City and the IFSCA and noted that they are creating new opportunities for the startups and fintechs.

The number of Start-ups in India have grown significantly from just over 300 in 2016 to over 1.17 lakh in 2023 as recognised by DPIIT, generating more than 12.4 lakh jobs, and 47% of the Start-ups have at least one Women Director. Additionally, India is the home to over 10,000 Fintech companies working in diverse sectors and segments. The Union Finance Minister also noted that India’s Fintech ecosystem is the 3^rd largest in the world and growing at 14% CAGR and that RBI recently floated a draft Framework for recognition of Self-Regulatory Organisation (SRO) for the Fintech sector for stakeholder’s consultation.

The following key action points emerged from the deliberations:

• DFS to conduct a day-long workshop with Law Enforcement Agencies (LEAs) wherein fintech ecosystem partners can voice theirissues/concerns.
• DPIIT mentioned that new patent examiners have been added which will reduce the turn-around-time of patent applications.
• Cost of lending/funding for critical areas including priority sector should be rationalised.
• Simplification and digitisation of KYC across all fintech segments.
• RBI, DPIIT and MoF to look at the change of ownership holding/control of listed fintech companies to enable them to be in-sync with regulatory compliance.
• Issues pertaining to cybercrime will be suitably addressed in the new Digital India Act.

Regulatory engagement: monthly virtual meetings and KYC digitisation to streamline fintech compliance and stakeholder issues. Regulators will hold monthly virtual meetings with start ups and fintech firms to address concerns; DFS will organise a workshop with law enforcement agencies and pursue simplification and digitisation of KYC across fintech segments. RBI's draft framework for recognition of a Self Regulatory Organisation is under stakeholder consultation. DPIIT has added patent examiners to shorten patent turn around; regulators will review change of ownership rules for listed fintechs; lending cost rationalisation and cybercrime provisions in the Digital India Act were identified as priority operational reforms.