For several years now, banking, investing, and financial management practices have been evolving swiftly throughout India. This has primarily been due to the dual advancement of fintech and internet connectivity. It has increasingly become the norm for Indian consumers and companies alike to conduct financial transactions and related business via digital means. This has led to a more dynamic and inclusive Indian economy, but it has also introduced fresh concerns regarding the need for more financial regulations and protections. Accordingly, earlier this year, Finance Minister Nirmala Sitharaman proposed a series of regulatory amendments for the 2023-24 Union Budget.
The proposed amendments concern the Banking Regulation Act, the Banking Companies Act, and the Reserve Bank of India Act. The collective goals behind them are to “improve bank governance and enhance investors’ protection,” as one write-up summarised.
Now, it is worth noting that similar improvements have been suggested and implemented several times in recent years. On an institutional level, for instance, a wide-ranging banking regulation bill was passed in 2020 to improve the performance of cooperative banks under the supervision of the central bank. And regarding individual Indian consumers who are increasingly active in the fintech world, recent privacy rights protections have made it safer to operate in digital spheres without risking personal data. Where the 2023-24 Union Budget is concerned, however, Minister Sitharaman and the Indian government have suggested more sweeping changes designed to fortify the Indian financial system for ongoing fintech expansion.
Altogether, the proposed amendments are quite comprehensive, suggesting small but significant changes to various aspects of Indian banking and financial law. Here, we will endeavour to examine some of the most significant proposals and how they may change things for consumers throughout India.
Setting Up a National Financial Information Registry
One of the boldest initiatives attached to the Union Budget amendments was the suggested establishment of a National Financial Information Registry or NFIR. Described as a more advanced version of the existing entity of CIBIL, the NFIR would be designed to support more comprehensive credit information checks. CIBIL already helps banks, government entities, and lenders view information related to credit before issuing loans to borrowers. The NFIR, however, would also reveal non-credit information amounting to “all financial information” relevant to a borrower.
There are numerous potential ramifications of such a registry, but two in particular have to do with the ever-evolving banking and financial ecosystem in India. The first is that individuals or companies with questionable credit but responsible financial habits may be better able to secure loans for investment. The second is that lenders will have access to more insight into a financial environment that is increasingly complex.
Simplifying Investor Education and Reclamation
One of the biggest consequences of an evolving fintech economy is a significant increase in online trading activity. As digital financial management has been normalised, individuals throughout India have gained access to mobile apps that provide them with access to international stock markets. These apps offer favourable market conditions, analytical assistance, up-to-the-moment charts, and rapid transaction processing. They have, as it is commonly put, democratised trading. At the same time, however, growing access to market investment has led to calls for more regulations and protections for investors.
One measure within the proposed banking and financial policy amendments that appears to be aimed at this goal is that of simplifying investor education and share reclamation. The Indian government established something called the Investor Education and Protection Fund Authority (IEPFA) back in 2016. It is designed to spread awareness among investors, as well as to issue refunds in relation to unclaimed dividends and other circumstances.
The newly proposed amendments include an effort to build up an IT portal related to the IEPFA in order to simplify its use. This, in theory, would help to protect the growing population of freely trading Indian investors.
Supporting Fintech Development
Ongoing support for fintech development was also a key aspect of Minister Sitharaman’s initial reveal of the proposed banking and finance amendments. Per the Ministry of Finance, Sitharaman commented specifically on fintech services and noted that they have been facilitated by India’s “digital public infrastructure.” She cited entities such as India Stack and UPI but also “proposed to enable more fintech innovative services” moving forward.
Sitharaman also introduced proposals for “up to 100 labs” to be used for the development of 5G applications. These would, in turn, bring about a range of new digital opportunities across industries, as well as create new employment in the process.
Altogether, these aspects of the proposed amendments will all work to support the ongoing growth and spread of fintech practices.
Supporting Digital Payment Infrastructure
On top of general support for fintech expansion, the Ministry of Finance’s recap of Sitharaman’s proposals noted that there is also language in place regarding digital payment infrastructure. Sitharaman cited data indicating that the number of digital payments had increased by 76% in 2022 alone. During the same year, the cumulative value of those payments had increased even more sharply, by 91%. Perhaps more than any other data, these numbers speak to the comfort level the Indian public has reached with making digital financial transactions.
Because of the increases in digital payment activity and value, Sitharaman made sure that her proposals included “continuation of fiscal support for this digital public infrastructure” in 2023-24. By all appearances, the government will continue, if not expand, its financial backing of digital payment infrastructure expansion.
These specific ideas and initiatives do not cover the entire scope of the banking and financial amendments that have been proposed. They do, however, speak to the nature of these amendments. Through initiatives like the ones discussed above, the Ministry of Finance is attempting to both support fintech expansion and make related practices safe and efficient. Digital financial practices offer a world of convenience and opportunity, but it is important that financial institutions, companies, investors, and consumers alike feel safe and confident taking advantage of those benefits. The proposed amendments represent an effort to meet that need.
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AUTHOR BIO:
Billy Ann Page is a freelance writer and blog contributor. Her work covers business, finance, technology, and an occasional foray into entertainment coverage. Billy Ann spends much of her time as a nomad, travelling the world to gain a fresh perspective.
References:
https://timesofindia.indiatimes.com/business/budget/govt-proposes-changes-in-banking-regulation-act-other-laws-to-enhance-investors-protection/articleshow/97533273.cms
https://primelegal.in/2023/09/24/the-impact-of-the-digital-personal-data-protection-act-2023-on-privacy-rights-in-india/
https://www.cnbctv18.com/finance/national-financial-information-registry-requires-many-legislative-changes-expert-15960231.htm
https://www.exness.com/ar/
https://pib.gov.in/PressReleasePage.aspx?PRID=1895290
https://primelegal.in
