A legal framework for consumer protection and regulating fintech companies and digital services were among the many recommendations in the report submitted by an inter-ministerial panel, chaired by the secretary of the department of economic affairs, to the finance minister Nirmala Sitharaman on September 2, 2019.
The recommendations also include setting up ministerial-level fintech working groups, reforms in the framework governing peer-to-peer lending platforms (P2P) and competitive neutrality by regulators for innovation.
The report by the steering committee on fintech-related issues constituted in March 2018 takes an expansive view of the sector, recommending ease of doing business for fintech and digital lending companies.
The committee held consultations with banks, industry bodies as well as investors and startups in the space including Omidyar Network and Walmart-backed PhonePe.
The report also recommends extending alternatives to Aadhaar- based eKnow Your Customer (eKYC) to fintech companies. Use of Aadhaar eKYC was banned for use by private entities, according to a Supreme Court judgement in September 2018.
The alternatives, which include providing for video-based KYC and use of DigiLocker, were recently extended to banks, telcos and non banking finance companies through an amendment to the Prevention of Money Laundering Act.
The report also recommends the formation of a taskforce by the ministry of finance with regulators to make suitable recommendations to the Data Protection Bill 2018 to safeguard consumer interests.
RBI grants more time to wallet companies for KYC
In a separate notification, Reserve Bank of India (RBI) extended the deadline for wallet companies to complete the KYC for existing customers. This is the second time RBI has extended the deadline, which was to come into effect on September 1, requiring all pre-paid instrument companies to comply with the requirement. The new date of compliance for wallet companies will come to effect in February 2020.
“It is advised that the timeline for the conversion of minimum detail PPIs to KYC compliant PPIs has been extended from 18 months to 24 months. The PPI-MD has been amended suitably. It may also be noted that no further extension will be granted for this purpose,” read the notification.
The notification cited the recent changes in enabling voluntary Aadhaar-based eKYC for banks and telcos and introduction of digital KYC alternatives through amendments in PMLA for the extension. The failure to convert users to full KYC compliant base will lead to loss of a significant user base for wallet companies.