Fintech panel for legislative changes for the issuance of DF, other instruments in demat form
New Delhi, September 2 () An interministerial panel on financial technology has suggested that legislative changes be made to allow the issuance of fixed deposits (FD) and other financial instruments in a dematerialized manner, since it is customer friendly and safe.
The Steering Committee headed by the Secretary of Economic Affairs also suggested that the Department of Financial Services (DFS) and the Reserve Bank of India can examine the suitability of the virtual banking system in the Indian context.
The panel, which presented its report to Finance Minister Nirmala Sitharaman on Monday, said the dematerialization of financial instruments is customer friendly given the broad scope of mobile technologies and also leads to disaster resilience and speedy recovery.
It recommended that appropriate regulatory and legislative changes be made to allow FDs and other financial instruments to be issued in a dematerialized manner and allow their use without friction as collateral.
The government should launch a campaign to convert all financial assets in power, especially from the entities under its control, such as post offices, as accurately as possible, but certainly electronically, according to the report.
Appropriate modifications may be made to allow the dematerialization of financial instruments, such as FD and other deposits of post offices, other forms of small savings certificates issued, gold deposit certificates issued under GMS, sovereign bonds of gold, etc., he said.
Pending changes in laws and regulations that may be necessary to allow depositors to store all financial assets, information regarding the assets can be stored in repositories so that consumers can access this information through a single window said.
Regarding virtual banking, he said that the Hong Kong Monetary Authority (HKMA) has recently issued guidelines for establishing virtual banks and is examining applications for virtual banking licenses.
DFS and RBI can examine the problem and prepare for a possible future scenario in which banks do not need to establish branches and, however, offer large-scale retail banking services ranging from loan extension, savings accounts, card issuance and the offer of payment services through its application or website, he said.
The panel also made a case to increase the limit of prepaid instruments (PPI) of the existing Rs 1 lakh.
The Committee recommends a comprehensive review of the PPI system with the goal of considerably liberalizing its use with adequate guarantees of non-monetary limits to allow the expansion of fintech, he said.
He noted that there is an urgent need to reduce KYC costs to promote financial inclusion among the weakest sections.
While large financial institutions can pay the charges, this may not be affordable for small players, he said, adding that the cost of incorporating a client is an expensive proposition and the new banks are at a serious disadvantage.
The panel suggested that there should be no charge for loading KYC data, while each download may be priced based on the principle that the user pays and this will allow Central KYC to take off early. Other committee members include Secretary of Financial Services, Secretary of MSMEs, CEO of UIDAI and Deputy Governor of RBI. DP CS ABM