Two people who attended the meeting, arranged by Digital Lenders Association of India (DLAI), said they saw the extension request as the ‘most critical’ part of the ongoing issue. ET reported on Wednesday that fintech industry associations plan to petition the government and RBI, seeking the rationale for the circular sent earlier this week.
“This is very critical as other RBI guidelines like the one on co-branding cards came in advance, giving time to companies to react. Monday’s note on non-bank prepaid payments instruments (PPIs) is effective immediately,” one of the people involved in the discussion said.
The central bank on Monday barred non-bank wallets and pre-paid cards from offering credit lines on fintech platforms.
“The representation seeking extension on compliance timeline also shows the industry is responsible and is trying to do the right thing,” another person aware of the discussions on Thursday evening said.
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According to the people mentioned above, there are common themes across representations being finalised on the issue by industry associations such as the Payments Council of India (PCI), under the Internet and Mobile Association of India (IAMAI), and the Fintech Association for Consumer Empowerment (FACE). The timeline extension request was discussed and finalised at the latest meeting, which was attended by representatives of credit card challenger firms Slice and Uni Cards, among others.
Their representation will also highlight how fintech startups have promoted financial inclusion.
“They will try to explain to the RBI that these business models have been around in the market for a few years now and have been scaled to five to eight million customers,” said one of the sources, who is aware of the top talking points being sent to the government and the banking regulator.
While there is growing consensus that RBI’s latest rule will affect a range of fintech startups, credit card challengers alone have seen investments of more than $500 million over the past 18 months from investors such as Tiger Global, Insight Partners, General Catalyst and others.
“I can tell you fintech investors are really spooked. It is not about just the latest circular but about what’s next from the regulator — whether more lending companies will have to change business models or even shrink their operations based on new guidelines on fintech lending expected in the coming weeks,” a fintech founder said .
In January, the RBI had set up a fintech department headed by executive director Ajay Kumar Choudhary. It recently outlined its three-year plan as part of the RBI’s Payments Vision 2025. This included a discussion paper on financial regulations for Big Tech, a framework for regulating buy-now-pay-later (BNPL) products, and rules on domestic storage of payments data.
As reported by ET, a report from Macquarie Research on June 21 said RBI has been coming down “heavily” on fintechs and has been advocating tighter regulations over the past several months. “It is our view that the message is clear that fintechs will be regulated more,” the report added.