Indian Government’s Fintech Steering Committee to explore regulatory sandbox model
The Indian Government has formed a Steering Committee to consider various issues relating to development of Fintech space in India, with a view to making Fintech related regulations more flexible & generate enhanced entrepreneurship.
The constitution of the Steering Committee on Fintech related issues will be: Secretary, Department of Economic Affairs (DEA, under Ministry of Finance); Secretary, Ministry of Electronics and Information Technology (MeitY), Secretary, Department of Financial Services (DFS); Secretary, Ministry of Micro, Small and Medium Enterprises (MSME); Chairperson, Central Board of Excise and Customs (CBEC); CEO, Unique Identification Authority of India (UIDAI); Deputy Governor, Reserve Bank of India (RBI), along with Joint Secretary (Investment), DEA as the Convener. The DEA Secretary will serve as the chairman.
The Steering Committee may also invite participants from the private sector.
The Terms of Reference of the Steering Committee include taking stock of the developments in the Fintech sector globally, and in India, and arrive at a common shared understanding of the current state of play. The Committee is expected to critically analyse the regulatory regime spread over different entities that has impacted the growth of Fintech in India.
The Committee will also consider how Fintech can be leveraged in critical sectors of the economy, such financing of MSMEs, affordable housing, delivery of e-services to vulnerable sections, provision of land record management and other government services, access and adoption of digital payments, and it will study the developments in these areas.
The Committee will develop suitable regulatory interventions, to drive growth in the Fintech sector. For example, it will explore the regulatory sandbox model to enhance the role of Fintech in the sectors identified for focused interventions.
During the past few years, Fintech regulatory sandboxes have been set up in several jurisdictions around the world, such as Singapore, Hong Kong, Australia and the UK. They encourage Fintech innovation, by allowing financial institutions and Fintech start-ups to experiment in a safe space and without the need for an expensive wider roll out, with the attendant risks for the companies as well as customers. Sandboxes also provide financial regulators an opportunity to learn about the risks associated with new technologies and adjust their regulation accordingly.
A recent report from a Working Group on Fintech and Digital Banking set up by the RBI recommended that an appropriate framework be introduced for “Regulatory Sandbox/innovation hub” within a well-defined space and duration and said that IDRBT (Institute for Development and Research in Banking Technology) is well placed to create and maintain a regulatory sandbox in collaboration with RBI.
The Committee will consider means of using data from the Goods and Services Tax Network (GSTN)  and data residing with information utilities such as Credit Information Companies (CICs) etc. in open domain, to develop applications for financing of MSMEs.
The Terms of Reference also includes working with Government agencies like UIDAI to explore creation and use of an unique enterprise identification number. UIDAI, a statutory body, under MeitY is responsible for issuing India’s national ID, Aadhaar.
Finally the Committee will look into international cooperation opportunities in Fintech with countries like Singapore, UK, China, etc.
 GSTN is a non-profit, non-government organisation (24.5% shares held by central government, 24.5% by state governments and remainder by non-government financial institutions), responsible for managing the IT system for the Goods and Services Tax (GST) regime which came into effect last year. The portal will be used by the government to track financial transactions, and it will provide taxpayers with all relevant services, from registration to filing taxes and maintaining and updating tax details.
The report of the RBI’s Working Group on Fintech and Digital Banking published on 2 February 2018, can be accessed here.
Last year, the Indian securities markets regulator, SEBI or the Securities and Exchange Board of India has constituted a ‘Committee on Financial and Regulatory Technologies (CFRT)’ to study Fintech and RegTech issues in the context of securities markets.