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RBI cracks the whip on bank-fintech nexus
July 15, 2022
Highly placed sources say the Reserve Bank of India has asked banks to trim their tie-ups with third-party fintech apps, especially where the bank is a lender to or equity investor in the fintech and holds substantial interest.
For instance, if a bank has extended credit, whether as working capital facility or term loan, to a fintech and the bank’s exposure to the fintech’s overall borrowings is 10 per cent or more, then it cannot use the fintech to source loans.
Likewise, when a bank has 10 per cent or more of equity investment in a fintech, it cannot use the platform to sell its banking products.
Sourcing of loans though digital apps has always been a contentious issue for RBI. In fact, in November 2021, the working group report on digital lending had raised red flags on some of these aspects and pitched for preventing regulated entities (banks/ NBFCs) originating loans from unregulated entities (fintechs).
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