Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said digital lending players should only carry out activities for which they have licenses and violations are not acceptable.
Last month, RBI had asked non-bank Prepaid Payment Instrument (PPI) issuers not to load their wallets and cards from credit lines or preset borrowing limits.
"The (digital lending) firms should operate under the licenses granted to them. If they are doing anything beyond that then they should seek our permission.
"Without permission if they are engaging in activities for which they have no license then it is not acceptable. This is going beyond the licensing requirement and there will be a risk build up which we cannot allow," Das said at an event organised by Bank of Baroda.
The governor said the central bank wants to support innovation but at the same time it wants the entire ecosystem to grow in an orderly and regulated manner so that there was no compromise on financial stability.
According to him, there are a large number of unregulated, unlicensed entities which are doing various kinds of lending activities. Also, there are licensed entities which are entering into activities they are not supposed to undertake.
RBI is dealing with the issue and has formed a committee, he said.
"The committee's recommendations have been examined and we will be issuing the relevant guidelines in this regard very shortly," he said, adding that these regulations have been delayed as the situation is complex and RBI has to be careful and cautious.
"We are being very cautious and trying our best to take a very balanced call that supports innovation and at the same time it does not, in any manner, compromise financial stability or leads to over leveraging or creates unnecessary financial risks," Das noted.
The governor also said the banking sector is going through a period of churning and the future of banking would witness a major shift in customers' choices and preferences with enhanced expectations from the banking industry.
"Going ahead, the world of banking is expected to be more collaborative as well as competitive, with newer players offering innovative financial products," he said.
Banks need to prepare themselves for facing the dynamic environment while keeping their focus on appropriate business models, sustainability, stability, and consumer centrality, Das said.
Good governance remains fundamental to success and should not be compromised, he said, adding that due care needs to be taken to protect the stakeholders from digital frauds, data breaches and cybercrimes.
