Steering Committee on Fintech-related issues suggests new laws for consumer protection

The Steering Committee on fintech-related issues has recommended a new legal framework for consumer protection and has also suggested new cash flow-based financing options for micro, small and medium enterprises.

What has happened?

• A new panel established to explore issues related to the financial technology (fintech) has submitted a report to the Finance Minister of India.
• In this report, the Steering Committee on Fintech-related issues, has provided new recommendations for a new legal protection framework for consumer protection.
• The recommended framework will also encompass the new fintech and digital services and the new National Digital Land Records Mission.
• The framework also works to have a unified database for each of the small industries and the agriculture sector.
• The framework will also remove the existing discriminatory barriers to the regulatory entry in digital payments infrastructure and aims to allow the non-banking financial companies (NBFCs) to venture into agriculture credit.
• The committee has also suggested new cash flow-based model-based financing for micro, small and medium enterprises (MSMEs).
• The fintech committee has recommended using new drones and remote sensing technology to quantify risk in agriculture credit and insurance.
• This will also aim to increase the application of artificial intelligence in the state-owned banks to improve their performance.
• The committee believes that these regulatory and legislative changes will be able to enable the fixed deposits and other financial instruments to be issued in the form of a dematerialised form. This will enable their use as collateral.

Other recommendations by the panel

• The panel has also recommended the use of video-based KYC(Know Your Customer) and has also approved the use of validated documents through DigiLocker in document verification instead of a physical copy or an Aadhaar-based KYC.
• The panel has recommended that while there should never be any charges for the uploading of KYC data, downloads may be charged.
• The panel has also recommended the fast adoption of regulation technology (or RegTech) by all financial-sector regulators. This will make ensuring compliance with existing regulations easier, quicker, and effective for everyone.