RBI Deputy Governor Says “FinTech regulation should be more entity-based than activity-based”

According to a report published on Tuesday, T Rabi Sankar, Deputy Director of the Reserve Bank of India (RBI), believes that financial technology (fintech) regulation should be more entity-based than activity-based. With FinTech and Big Tech companies increasingly posing a threat to conventional banks, the Reserve Bank of India defended lenders on Tuesday, stating that banks remain at the heart of the payments system since they act as a link between depositors and borrowers. After Google and Amazon revealed their partnership in facilitating deposit products – a main focus of the banking regulator – this is the first time a top RBI official has spoken about restrictions around Big Tech.

During his speech, he explained why fintechs are only allowed to provide payment services and not deposit goods. He believes that if a fintech company provides liquidity services, such as credit and deposit products, it should be regulated much like traditional liquidity service providers, such as banks.

During his speech, he explained why fintechs are only allowed to provide payment services and not deposit goods. He believes that if a fintech company provides liquidity services, such as credit and deposit products, it should be regulated much like traditional liquidity service providers, such as banks.

“The approach to regulation also needs to adapt to the type of entity being regulated. While similar activities should attract uniform regulation in most cases, such activity-based regulation might be less effective than entity-based regulation when one is dealing with financial activities by Big Tech firms,” said the deputy governor.

While cybersecurity threats outnumber financial hazards for everyone, when dealing with major financial market infrastructure organisations or Big Tech, “systemic risks, operational risks, and competition risks are of paramount relevance. “With Big Tech in place, the lines between financial and non-financial enterprises are becoming increasingly blurred, and they are no longer bound.

The deputy governor further explained, “Regulation is sometimes defined as the process of slowing down change to allow a system to adapt and evolve.”

When a non-financial company must comply with financial regulations, there may be friction, but slowing down the transition process “is often the best approach to assure customer protection.”

Fintechs are not banks!