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RBI ups scrutiny of fintechs with more inspections

Economic Times · 9m

India's financial regulator, the Reserve Bank of India (RBI), is strengthening oversight and regulation of fintech firms following a series of inspections that revealed non-compliance with customer due diligence. The RBI has ordered fintech giant Paytm to wind down its banking unit and directed Visa to cease business-to-business card payments through third-party fintech firms. This stricter approach mirrors global trends as financial regulators in major markets, including China, crack down on rule violations and establish new regulations for the fintech sector. The RBI is particularly concerned about the digital customer identification process used by fintech firms, which relies on government identity proof and mobile numbers. The regulator is conducting regular inspections, investing in better technology, and hiring analysts to study customer data in an effort to address regulatory violations. The increased scrutiny and evolving regulations could result in higher compliance costs and capital requirements, potentially leading to consolidation in the sector. However, these measures aim to encourage compliance and support companies that adhere to regulations.