In a crucial step to promote best practices in the thriving fintech sector, the Reserve Bank of India (RBI) has proposed setting up a repository to capture essential information about the companies operating in this space. This will include data about their activities, products, technology stacks and financial information. The decision was shared by RBI Governor Shaktikanta Das while announcing decisions of the Monetary Policy Committee (MPC) on development and regulatory policies today.
“In order to better understand developments in the FinTech ecosystem and provide adequate support to the sector, it is proposed to establish a repository to capture essential information about FinTechs, covering their activities, products, technology stack, financial information, etc.,” it says the RBI statement.
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However, the RBI has said that fintechs are encouraged to voluntarily provide relevant information to the repository, which will help in shaping appropriate policy approaches. This repository will be operational by the Reserve Bank Innovation Hub in April 2024 or earlier. The guidelines required for this will be issued separately.
“To ensure a resilient FinTech sector and promote best practices, regulators and stakeholders must have relevant and up-to-date information about FinTech companies, including the nature of their activities. Today, FinTechs are using new technologies such as Distributed Ledger Technology (DLT) and Artificial Intelligence / Machine Learning (AI / ML) and so on,” the statement continued.
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Additionally, RBI’s MPC has decided to set up a cloud facility for the financial sector in India. The proposed facility aims to improve the security, integrity and privacy of financial sector data. It is also expected to facilitate scalability and business continuity.
Banks and financial institutions manage an ever-increasing volume of data and many use various public and private cloud facilities. The RBI now wants them to use the government’s cloud facility. “The cloud facility will be set up and initially operated by Indian Financial Technology & Allied Services (IFTAS), a wholly owned subsidiary of RBI. Finally, the cloud facility is transferred to a separate entity owned by the financial sector participants. This.” “The cloud facility should be introduced in a calibrated manner in the medium term,” the RBI statement said.
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Additionally, the RBI also decided to conduct a review of the “Regulatory Framework for Hedging Foreign Exchange Risks,” saying the framework has been refined to improve operational efficiency and facilitate access to foreign exchange derivatives, especially for users with small exposures. This also ensures that a wider range of customers with the necessary risk management expertise have the flexibility to manage risks efficiently. The central bank will issue separate framework instructions.
In particular, the regulatory framework for hedging exchange rate risks was reviewed in 2020 to develop a principles-based system. After several feedbacks, it has been made more comprehensive and includes instructions for all types of transactions – over-the-counter (OTC) and exchange-traded – under a single main guideline.
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