India’s banking regulator has made some high-profile enforcement strikes in current weeks.
Final month, the Reserve Financial institution of India (RBI) ordered Paytm Funds Financial institution to halt its companies after an audit uncovered “persistent non-compliances and continued materials supervisory considerations.”
Extra lately, the RBI has directed Visa and Mastercard to droop home transactions for enterprise fee answer suppliers (BPSPs).
Writing about these developments Wednesday (Feb. 21), Bloomberg opinion columnist Andy Mukherjee argues that the regulator’s strikes observe the development of neo-banking that’s arisen from cloud computing, which has let India transfer huge swaths of small funds instantaneously.
This has additionally opened the door for extra fraud, with know-your-customer (KYC) guidelines changing into tougher to implement.
“If particular person KYC is that this sketchy, the method of onboarding companies isn’t ironclad, both,” wrote Mukherjee. “It was once that solely massive retailers accepted on-line funds, as playing cards have been too costly for small gamers. However now greater than 50 million retailers settle for QR code-based settlements over an ubiquitous smartphone-based protocol often called Unified Funds Interface,” or UPI.
To fight fraud, he recommends a three-pronged answer, the primary of which is making India’s Aadhaar ID verification safer.
Mukherjee additionally notes that the majority UPI transactions are free, which means conventional lenders don’t have any incentive to improve their know-how. He additionally argues that the Nationwide Funds Company of India, which manages the UPI, is a monopoly, and says extra competitors will assist cut back fraud within the system.
Final week, RBI Government Director P. Vasudevan mentioned the regulator needs to take a “hands-off” strategy to its FinTech oversight, whereas nonetheless anticipating these corporations to stay to the foundations of buyer verification and information safety.
There are “no harsher measures approaching FinTech,” Vasudevan advised Bloomberg Information.
This month additionally noticed studies that Paytm, which owns Paytm Funds Financial institution, was below investigation by India’s monetary crime-fighting company for potential violations of international change guidelines.
The investigation is aimed toward figuring out whether or not platforms operated by One97 Communications, also called Paytm, took half in any illegal actions associated to international change transfers, Reuters reported , citing unnamed sources.
A spokesperson for Paytm has denied any violations of FEMA, calling the accusations “unfounded and factually incorrect.”
