This article analyses some of the key points made in the final report of Steering Committee (the ‘Committee’) on Fintech related issues which was constituted by the Ministry of Finance, Department of Economic Affairs
Financial inclusion of MSMEs
The report focuses on development and growth of Fintech, technical innovations and also makes various recommendations on how Fintech plays a role in increasing access to finance as well as promoting the growth of MSMEs in India.
The report provides insight on how the financial inclusion of MSMEs can be enhanced by:
- the regulations concerning financial technology more friendly towards Fintech innovations
- development of cash flow based financing for MSMEs
- the integration of the GSTN and TReDS to facilitate lending to MSMEs
- using Blockchain as public infrastructure
Use of drone and remote sensing technology
Drones and other remote sensing technologies can help in monitoring crop patterns and thereby enabling efficient delivery of both credit and insurance products.
Department of Financial Services and PSU banks
The report states that the Department of Financial Services and PSU banks may work together and may increase automation using Artificial Intelligence, cognitive analytics & machine learning.
Credit registry for farmers
The Committee recommends that National Bank for Agriculture and Rural Development (NABARD) should create a credit registry for farmers. Further, the report also suggest that fintech may be used along with core banking solutions by agri-financial institutions for improving efficiency in credit services.
Adoption of Regulation Technology by financial institutions
The Committee has recommended that regulation technology should be adopted by the financial institutions as it can have the following benefits:
1. Automation of compliance
2. Improvement in KYC mechanisms and reduction of fraud
3. Risk analysis and reduction
4. Real time monitoring of transactions control fraudulent activities
Adoption of Supervisory technology by financial sector regulators
The Committee also recommends that Fintech can be utilised for aiding the supervisory function of regulators. Such supervisory Fintech can be utilised for data collection and data analytics thereby reducing compliance costs for the regulated entity and processing costs for the regulator.
Use of Fintech by Micro Units Development and Refinance Agency (MUDRA) program
The Committee has recommended that in order to simplify the delivery of services, the MUDRA program should mandate use of Fintech by all players as well as open credit supply channels through non-banking Fintech credit companies.
P2P lending platforms
The Committee also recommended reforming the present model of P2P lending platforms for development of a marketplace model of debt financing in India.