An inter-regulatory working group set up by the Reserve Bank of India has published its report on fintech and digital banking.

The working group was set up in July 2016 and included representatives from the RBI, SEBI, IRDA, and PFRDA, from select financial entities regulated by these agencies, rating agencies such as CRISIL and FinTech consultants/companies.

The report calls for a deeper understanding of various fintech products and a risk-based approach to regulation in this field. It also recommended setting up Regulatory Sandbox/Innovation hub where financial regulators will provide the requisite regulatory support to fintech companies.

“In view of IDRBT’s unique positioning as a research and development institute, and as indicated by some of its activities, it is felt that IDRBT is well placed to create and maintain a regulatory sandbox in collaboration with RBI for enabling innovators to experiment with their banking/payments solutions for eventual adoption,” the report said. “The Institute may continue to interact with RBI, banks, solution providers regarding testing of new products and services and over a period of time upgrade its infrastructure and skill sets to provide full-fledged regulatory sandbox environment.”

In addition, the working group recommendation collaboration between fintech startups, banks and regulated entities; tax subsidies; and the establishment of a self-regulatory body for fintech companies, among others.

With regard to digital currencies, the report said that as they are not widely used or accepted at present, their “influence on financial services and the wider economy is negligible today, and it is possible that in the long term they may remain a product for a limited user base on the fringes of mainstream financial services.”

Further highlighting the growth of the Indian Fintech industry, the working group said:

“At present around 400 FinTech companies are operating in India and their investments are expected to grow by 170% by 2020. The Indian FinTech software market is forecasted to touch USD 2.4 billion by 2020 from a current USD 1.2 billion, as per NASSCOM. The transaction value for the Indian FinTech sector is estimated to be approximately USD 33 billion in 2016 and is forecasted to reach USD 73 billion in 2020.”