On the evening of the 20th of September, 2022, the Jio World Convention Centre in Mumbai was bustling with activity and filled to capacity. This was the scene at the third iteration of the Global Fintech Fest. The event was a quintessential meeting point for various stakeholders from the financial technology world – including fintechs, traditional banks, non-banking financial institutions, and regulatory authorities.
One of the key speakers at this event was Shaktikanta Das, who had recently ended his term as the Governor of the Indian Central Bank, the Reserve Bank of India (RBI). The event came on the heels of new, stricter regulations released by the RBI for digital lenders which were put in place in response to cries of exorbitant interest rates, allegations of aggressive collection strategies, and accusing fingers pointed at breaches of data privacy.
In his speech, Das likened the fintech industry landscape to a road. As is the case with a road growing busier, he believed it was vital for all parties to adhere to traffic rules for the sake of their safety and the welfare of others. Following this, there was a sustained period of strict compliance requirement from the fintech industry.
The new rules introduced by Das and upheld throughout his term as the governor were initially met with disappointment. These regulations did not weaken over the following period but rather intensified. This marked a standout feature of Das’s leadership, the firm and persistent hand dealt to companies in violation of these rules.
The year 2024, in particular, saw significant changes. The RBI not only tightened guidelines overseeing peer-to-peer lending but also penalized several platforms that failed to adhere to these norms. The same year, stern restrictions were placed on Paytm Payments Bank for its repeated non-compliance with regulatory guidelines.
Around the same time, securities and markets were also experiencing their share of regulatory directives. Madhabi Puri Buch, the then chairperson of India’s Securities and Exchange Board of India (SEBI), was pushing for heightened transparency from foreign portfolio investors and advocating for a move towards self-regulatory structures in mutual funds.
According to these new changes, instead of depending solely on the enforcement actions of the SEBI, the mutual fund houses themselves would be held accountable for compliance. This was received with dismay in the mutual fund industry as it seemed that regulatory oversight was being transferred without losing the punitive measures.
The industry was quick to express concerns, contending that these changes could hamper their innovative capabilities and aggravate operational costs without corresponding advantages. But SEBI was steadfast in its stance, showing no signs of leniency.
Industry observers point out that today, the status quo appears to be evolving. This is marked by Sanjay Malhotra and Tuhin Kanta Pandey assuming the leadership reins at the RBI and SEBI respectively. Both Malhotra and Pandey are Indian Administrative Service (IAS) officers.
Noteworthy is that they have shown a willingness to listen and consider the viewpoints of the industry. They are striving towards a more balanced regulatory landscape and have started easing some of the norms that were previously met with resistance.
The changes brought on by this new leadership are not merely limited to a more responsive and balanced approach towards regulation. These institutions now face new difficulties, part of which can be attributed to the US President, Donald Trump’s use of tariffs as a geopolitical tool.
In the case of the RBI, there is an increase in risk from the external sector that complicates its monetary policy committee’s rate-setting decisions. In addition, the flexible inflation targeting framework, a key part in taming inflation within the 2-6% band, is up for review.
The current framework, which is revised every half a decade, was last reviewed in 2021. The government then decided to retain the initial inflation target. Economists now debate whether core inflation should be adopted as the central rate for the RBI to target, as opposed to the current method.
These economists argue that taking into account core inflation – which excludes food or fuel prices – could provide a more accurate picture. However, this is countered by the fact that the food basket contributes a significant 46% to the consumer price index (CPI) and that excluding it could potentially distort the data.
Meanwhile, at SEBI, the challenge lies in ensuring market stability and safeguarding investor interest. This is critical especially now as a significant number of small investors are showing a growing interest in derivatives. Recent data from SEBI revealed that a high percentage of individuals trading in equity derivatives experienced net losses in the six months ending May 2025.
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