{"id":31969,"date":"2021-06-18T15:16:27","date_gmt":"2021-06-18T09:46:27","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=31969"},"modified":"2025-01-07T18:17:14","modified_gmt":"2025-01-07T12:47:14","slug":"fintech-laws-in-india","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/fintech-laws-in-india\/","title":{"rendered":"Fintech Laws in India: Everything You Need to Know"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The term \u201cFintech\u201d is a combination of two vital facets of business- Finance &amp; Technology. Fintech is a technology-cum solution that has proven its worth in the banking sector by improving its core functionality. And now it has stretched its footprint over other sectors such as insurance, payment gateway, asset management, and so on. It has been serving nations other than India since 1950 with the services like credit cards and ATMs. At this point, the impact of Fintech in the financial sector is beyond incredible. Every dominating industry in India is regulated by a specific regulatory body, and fintech is no different here. In this article, we shall focus on the Fintech Laws in India and regulations in India.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/fintech-laws-in-india\/#The_prominence_of_Fintech_in_the_Financial_Sector\" >The prominence of Fintech in the Financial Sector<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/fintech-laws-in-india\/#An_Outlook_on_Services_rendered_by_Fintech_Industry\" >An Outlook on Services rendered by Fintech Industry<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/fintech-laws-in-india\/#A_Brief_Explanation_on_Fintech_Laws_in_India\" >A Brief Explanation on Fintech Laws in India&nbsp;&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/fintech-laws-in-india\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_prominence_of_Fintech_in_the_Financial_Sector\"><\/span>The prominence of Fintech in the Financial Sector<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The ever-evolving technology in the market has led to the growth of fintech firms in India. These firms largely cater to bigger entities, small firms, and customers and allow them to manage their fiscal transactions efficiently. Moreover, it is also empowering financial firms to shift their focus from business-centric to customer-centric services. Presently, fintech is making its contribution in;<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/06\/Fintech-Laws-in-India-1.png\" alt=\"The prominence of Fintech in the Financial Sector\" class=\"wp-image-31985\" width=\"512\" height=\"385\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/06\/Fintech-Laws-in-India-1.png 1000w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/06\/Fintech-Laws-in-India-1-300x226.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/06\/Fintech-Laws-in-India-1-768x578.png 768w\" sizes=\"(max-width: 512px) 100vw, 512px\" \/><\/figure><\/div>\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"An_Outlook_on_Services_rendered_by_Fintech_Industry\"><\/span>An Outlook on Services rendered by Fintech Industry<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Currently, Fintech Industry can be found\nserving the following areas.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Crowdfunding Platforms<\/h3>\n\n\n\n<p>Fintech industries usually leverage\ntechnology that empowers startups and new businesses to raise capital without\ncaring about national boundaries. The technology has ensured seamless access to\ninternational markets and investors for aspiring entrepreneurs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Robo-Advisors<\/h3>\n\n\n\n<p>Robo-advisors are web-based investment\nmanagement services that leverage algorithms to smartly allocated assets and\ncreate a portfolio for customers. Moreover, they also empower end-users,\nirrespective of age barrier, to make an investment at lucrative fees with\nminimal manual effort.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Mobile Payments<\/h3>\n\n\n\n<p>Mobile payment applications and gateways\nare some exemplary examples of Fintech\u2019s reach. With such technologies, users\ncan expect prompt financial transactions without even visiting the bank. The\nbrands like PayPal and Venmo allows their clients to make a monetary\ntransaction at cheap transaction fees.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Regtech<\/h3>\n\n\n\n<p>Regtech (aka regulatory technology) deals\nwith the automation of compliance processes relating to financial avenues.\nMoreover, it ensures seamless and error-less management of massive data,\nincluding compliance records and transaction records.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Insuretech<\/h3>\n\n\n\n<p>The term insuretech refers to the deployment of technology within the insurance model, enabling firms to render customized insurance plans and data protection. Moreover, it helps simplify the insurance process via online policy management as well as claim filings.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Blockchain and Cryptocurrency<\/h3>\n\n\n\n<p>Blockchain largely relies on encrypted\ntechnology to create cryptocurrencies, a revolutionary digital currency that is\nmore secure than fiat currency. In effect, blockchains render vast\npossibilities to undermine and modify traditional business models.<\/p>\n\n\n\n<p>&nbsp;A smart contract is perhaps the\nbest example of a blockchain application. Ideally, they are used to create self-executing\ncontracts (written into lines of codes) between the concerned parties. The\ncodes play a vital role in executing the agreement on the agreed terms. The\ntechnology seems to be groundbreaking because it is capable of connecting two\nparties that have never met before. Where In-person confrontation is apparent\nwith the traditional practices of contract, smart contract omits such\nobligations by digitizing the whole process.<\/p>\n\n\n\n<p><strong><em>The subsequent section will shed some light on prevailing Fintech laws and regulations. <\/em><\/strong><\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/fintech-startups-aiming-for-nbfc-license-despite-several-challenges\/\">Fintech Startups Aiming for NBFC License Despite Several Challenges <\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"A_Brief_Explanation_on_Fintech_Laws_in_India\"><\/span>A Brief Explanation on Fintech Laws in India&nbsp;&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Every technology has its downsides, no matter how advanced it is. Since fintech firm largely renders digitize solutions, it is also prone to patch holes, which can be negatively manipulated. And that\u2019s where regulatory authorities come into the picture. By testing and governing the functional aspects, the regulator aims to prevent these firms from performing illicit operations. At present, fintech firms come under the ambit of <a href=\"https:\/\/corpbiz.io\/rbi\" title=\"RBI Services\">RBI<\/a>, IRDAI, <a href=\"https:\/\/corpbiz.io\/sebi\" title=\"SEBI Registration and Consulting Services\">SEBI<\/a>, <strong><em>Ministry of Corporate Affairs<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Ministry_of_Corporate_Affairs\"><strong><em>[1]<\/em><\/strong><\/a><\/sup>, and Ministry of Electronics &amp; Informative Technology. However, fintech firms that deal with <strong><a href=\"https:\/\/corpbiz.io\/peer-to-peer-lending-license\" title=\"P2P License in India\">P2P lending<\/a><\/strong>, account aggregation, payments, crypto \u00adcurrencies, etc are governed by the Reserve Bank of India.<\/p>\n\n\n\n<p><strong><em>The section below will render basic\ncomprehension on existing Fintech Laws in India <\/em><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Regulatory Sandbox (RS)<\/h3>\n\n\n\n<p>RS usually refers to the live testing of\nemerging products and services in a controlled environment. The RS permits\nexecuting field tests to gather evidence on the risks and pros of new financial\ninnovations. The Reserve bank has already facilitated an Enabling Framework for\nRegulatory Sandbox on August 13, 2009.<\/p>\n\n\n\n<p>The RS Framework is accessible to FinTech\ncompanies, banks, financial avenues, start-ups only. RS usually tests new\nproducts &amp; services in the pre-launch stage to identify the potential\nvulnerabilities.<\/p>\n\n\n\n<p>According to the IRDA notification\nreleased in 2019, the Regulatory Sandbox aims to serve the following purposes.<\/p>\n\n\n\n<ul>\n<li>The\norderly development of the insurance sector<\/li>\n\n\n\n<li>Facilitating\ninnovation<\/li>\n\n\n\n<li>Protection\nof interests of policyholders<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Payment and Settlement Systems Act, 2007<\/h3>\n\n\n\n<p>It is an RBI-driven Act that oversees and\nregulates financial transactions in India. The Reserve Bank of India has\nimplemented two regulations under this Act, namely;<\/p>\n\n\n\n<ul>\n<li>Board for Regulation and Supervision of Payment and Settlement Systems Regulations, 2008 (aka&nbsp;BPSS Regulations)<\/li>\n\n\n\n<li>Payment and Settlement Systems Regulations, 2008<\/li>\n<\/ul>\n\n\n\n<p><strong><em>Given the powers bestowed by RBI, BPSS is\nliable for;<\/em><\/strong><\/p>\n\n\n\n<ul>\n<li>Authorizing\nand prescribing policies<\/li>\n\n\n\n<li>Setting\nstandards for regulating<\/li>\n\n\n\n<li>Supervising\nthe payment and settlement systems<\/li>\n<\/ul>\n\n\n\n<p>On the contrary, the PSS Regulations,\n2008 set out the procedural requisites for starting and executing the payment\nsystem.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Regulation of Prepaid Payment Instruments (PPIs) by the Reserve Bank of\nIndia<\/h3>\n\n\n\n<p>Prepaid Payment Instruments (\u201cPPIs\u201d)\nrefers to instruments that enable the purchase of goods &amp; services,\nincluding remittance facilities, financial services, etc., corresponding to the\nvalue available in such instruments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Regulation of Payment Intermediaries by the Reserve Bank of India<\/h3>\n\n\n\n<p>In 2009, RBI came up with the master\ndirections, given section 18 of the PSS Act, dealing with the following areas\nwith consumer\u2019s interest in mind.<\/p>\n\n\n\n<ul>\n<li>Opening\nand Operation of Accounts<\/li>\n\n\n\n<li>Settlement\nof Payments for Electronic Payment Transactions Involving Intermediaries<\/li>\n<\/ul>\n\n\n\n<p>Directions aim to augment the quality of\nthe transaction and envision solidity on the legal front, making the process\nmore secure and seamless for the end-users.<\/p>\n\n\n\n<p>Moreover, the Reserve Bank has also rolled out the directions for the&nbsp;Regulation of Payment Aggregators and <a href=\"https:\/\/corpbiz.io\/payment-gateway-license\" title=\"Payment Gateway License\"><strong>Payment Gateways<\/strong><\/a>&nbsp;last year u\/s 18 read with section 10(2) of the PSS Act.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Payment Banks<\/h3>\n\n\n\n<p>A Payment Bank does seem like a\ntraditional bank, but its scope of operation is quite narrow. They lack the\nrights of bestowing loans and credit cards to needy ones. Moreover, such banks\ncome under the ambit of Companies Act, 2013 and section 22 of the Banking\nRegulation Act, 1949. The said Act has limited their operation to the\nacceptance of demand deposits, payments and remittance services.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">NBFC Regulation<\/h3>\n\n\n\n<p>An entity running a FinTech business may have to seek an RBI license to function as NBFC if its falls within the underlying criteria. The 45-IA of the RBI Act, mandates <a href=\"https:\/\/corpbiz.io\/nbfc-registration\" title=\"NBFC Registration\"><strong>NBFC<\/strong><\/a> to remain non-functional in the absence of RBI-certified registration or a net owned fund of Rs. 25,00,000, and not surpassing Rs 100,00,00,000.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>We hope that the above section has bestowed the best possible explanation on Fintech laws in India and regulations. However, if you think that we have missed something relevant to this topic, let us know.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/rbi-issues-new-guidelines-for-payment-aggregators\/\">RBI Issues New Guidelines for Payment Aggregators <\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The term \u201cFintech\u201d is a combination of two vital facets of business- Finance &amp; Technology. Fintech is a technology-cum solution that has proven its worth in the banking sector by improving its core functionality. And now it has stretched its footprint over other sectors such as insurance, payment gateway, asset management, and so on. It [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":31980,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[272],"tags":[1820],"acf":{"service_id":"69"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":5352,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/31969"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=31969"}],"version-history":[{"count":11,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/31969\/revisions"}],"predecessor-version":[{"id":68232,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/31969\/revisions\/68232"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/31980"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=31969"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=31969"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=31969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}