Ashwin Manikandan | ETtech | May 27, 2019, 08:04 IST
The key to attaining New Delhi’s objective of an all-inclusive cashless economy may lie in making adequate investments in digital infrastructure and creating a regulatory regime that helps underpin the expansion of fintech companies.
Over the past month, the Reserve Bank of India (RBI) has published a comprehensive payments vision document and drafted rules for a regulatory sandbox that fintech startups can use and help create a $1-trillion digital economy by 2025.
The central bank said the focus would be on “competition, cost, convenience and confidence.” Industry experts, on the other hand, believe democratising access is crucial for the mission to succeed. “The need of the hour is for the government to build public infrastructure that ensures last milers are integrated to the central economy,” said Anurag Jain, founding member of the Digital Lenders’ Association India, an industry body representing 60 fintech cos. “Be they banks or fintech lenders, most are concentrated in urban centres. The government must ensure that credit facilities are easily accessible to rural borrowers as well.”
While the Pradhan Mantri Jan Dhan Yojana (PMJDY) has helped banks open new accounts in underpenetrated markets, many of these accounts remain inactive. The new to credit (NTC) customers continue to remain outside formal credit channels as they have negligible data footprint, which can be used by banks to underwrite basic services such as personal credit and insurance.
“There are about 400 million adults in India with no credit history. Of them, around 300 million have bank accounts but never accessed credit and the rest 100 million have no bank account,” said Manu Sehgal, business development leader, Emerging Markets, Equifax. “To achieve the objective of financial inclusion, it is imperative to make it easier for these customers to access funds.”
Where banks have failed, fintech companies may thrive, say industry experts. With narrowing digital divide, access to financial services would be driven by the growing 330 million smartphone and 500 million internet userbase, industry stakeholders said. There are also concerns about customer data protection.
A draft bill modelled after the European legislation has been submitted for discussions. The financial services industry expects this bill to be tabled in parliament in the first few sessions after the elections.
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