Money & Banking

Panel on fintech bats for ‘marketplace model’of debt financing

KR Srivats New Delhi | Updated on September 04, 2019 Published on September 03, 2019

The government-constituted steering committee on fintech has urged the Finance Ministry to develop a “marketplace model of debt financing in India” by reforming the present model of P2P lending platforms.

Potential hindrance in terms of restrictions on overall and individual exposure limits may be reviewed, and options such as allowing Mudra Bank to directly fund or co-fund SMEs and MSMEs through P2P platforms may also be examined as an alternative credit delivery channel, suggested the committee, whose report was submitted to Finance Minister Nirmala Sitharaman on Monday.

The steering committee, headed by former Department of Economic Affairs Secretary Subhash Garg, was mandated to focus on how fintech can be leveraged to enhance financial inclusion of micro, small and medium enterprises (MSMEs). The credit needs of MSMEs, households and individuals can be taken care of by creating a marketplace model of debt financing, where savers, non-banks and banks can also be permitted to lend, the report said.

Currently, the MSMEs cannot be a participant in the P2P platforms. The panel has also called for reform of the pre-paid instruments (PPI) system, and made a case for “substantially revising” upwards the current ₹1 lakh limit. Currently, the maximum outstanding amount in a PPI account (even if it is a full KYC account) is ₹1 lakh.

As regards KYC norms, the panel has recommended various options, including the possibility of video-based KYC norms and making available validated electronic versions of KYC-related documents through DigiLocker, which could be used by service providers with the prior consent of the customers.

Experts’ take

Navin Surya, Chairman, Fintech Convergence Council, said:

“We believe that close to 50 recommendations would be closely monitored by all key stakeholders for implementation to achieve the growth objectives of the sector,” Surya said.

Pradeep S Mehta, Secretary General, CUTS International, noted: “In addition to reinforcing such recommendations, the committee should have identified roadblocks in their adoption and designed a roadmap for their implementation by addressing the key concerns of the relevant stakeholders.”

Published on September 03, 2019
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