Stating that there is a dearth of ‘coherent’ statutes on the subject, a panel of financial regulators on Thursday said there is a need for a standalone law on data protection and privacy in the country.
“There is a need for a standalone data protection and privacy law in the country,” the Inter-Regulatory Working Group on Fintech and Digital Banking said in its recommendations.
“There is a dearth of coherent data protection and privacy law in the country and it is suggested to bring this to the notice of the financial sector regulators/government,” the 12-member committee headed by RBIs executive director Sudarshan Sen said.
It also had officials from capital markets regulator Sebi, insurance watchdog Irdai, the Pension Funds Regulatory and Development Authority, bankers from SBI and HDFC Bank, and experts from the National Payments Corporation of India and ratings agency Crisil in it.
It can be noted that in a landmark judgement, a nine- member constitution bench of the Supreme Court had recently ruled that privacy is a fundamental right for Indians.
It also asked for encouraging a self-regulatory body of fintech companies.
The inter-regulatory panel’s commentary on the data protection law came as part of the need to invest in fraud prevention.
Acknowledging that it may be easier to track frauds undertaken through electronic means than physical fraud, it said the onus is on fintech players to utilise their technological expertise and assist or engage with regulators to draft appropriate guidelines to prevent fraud.
In order to give a boost to the emerging fintech sector, the report recommended the government to consider introducing tax subsidies for merchants that accept a certain proportion of their business revenues from the use of digital payments as opposed to cash.
The report said financial services, including banking services, are at the cusp of a revolutionary change driven by technological and digital innovations at present.
It said the government should think in terms of investing in financial technology firms and start-ups as is being done by Singapore, which has committed USD 160 million for the purpose.
The financial sector regulators need to engage with fintech entities in order to chalk out appropriate regulatory response and with a view to realign regulation and supervision in response to the changing environment, it said.
There is a need for dedicated organisation structure within every regulator to deal with the fintech sector, it said.
The RBI-promoted Institute for Development and Research in Banking Technology can create and maintain a regulatory sandbox in collaboration with RBI for enabling innovators to experiment with their banking/payments solutions for eventual adoption.
On virtual currencies like bitcoins, it said if such digital currencies’ usage becomes widespread, it would likely have material implications for the business models of financial institutions and could potentially lead to a disintermediation of some existing payment services.
“At the moment, DCs schemes are not widely used or accepted, and they face a series of challenges that could limit their future growth,” it said.
Even though their influence on financial services and the wider economy is negligible today, 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, it said.
On regulation of such cryptocurrencies, it termed it as a ‘complicated issue’ and added that the cross-border reach of DC schemes may make it difficult for national authorities to enforce laws.
The general public has time till February 28 to comment on the recommendations of the panel.moneycontrol