The finance ministry has set up an eight-member committee to consider various issues related to fintech, for making regulations more flexible and promoting financial inclusion. Chaired by the secretary, economic affairs, it will also suggest ways to enhance entrepreneurship in the financial technology space, where India has distinctive comparative strengths vis-à-vis other emerging economies. The panel is to also consider how fintech can be leveraged to enhance financial inclusion of micro, small and medium enterprises (MSMEs).
The Reserve Bank of India (RBI) had given a February 28 deadline, for all mobile and online-based payments companies
to get KYC of their customers done.
According to those in the sector, only 35-40 per cent of all prepaid payment instrument (PPI) users have heeded the repeated requests sent by companies
for getting the full KYC done.
“We have seen a drop of almost 55 per cent in the number of transactions. We make money on a large number of small transactions, not big-ticket singular ones. This has affected our user base of customers who did everyday daily transactions on our platform,” said the chief executive of a Delhi-based mobile wallet player.
“All we are saying is that a strict deadline is not helping anyone. No one is against KYC. There needs to be flexibility in getting the whole process done. We, along with other players, have seen transactions drop to 20 per cent. The government needs to lighten the norms for transactions less than ~10,000. We hope to meet the committee soon in this regard,” said Praveen Dhabhai, operations head at Payworld.
Digital payments got the limelight after the demonetisation of major currency in late 2016. However, these are still in nascent stages of adoption and strict KYC norms, goes the argument, are affecting its growth. “Our current focus is on transforming customer behaviour and we are investing marketing money to create that change. However, it is a very thin-margin business and incremental costs like KYC have the potential to create severe damage to long-term sustainability of the business,” said Sriram Jagannathan, co-chairs of the PPI committee at PCI.
The committee will have the secretaries of the ministry of electronics & information technology, of the MSME ministry and of the department of financial services. Also, head of the Central Board of Excise and Customs, the chief executive of the Unique Identification Authority of India and a deputy governor of RBI. The joint secretary (investment) in the economic affairs department would be convener. The panel may invite people from the private sector.