How Shaktikanta Das Moulded India’s Fintech As RBI Governor

How Shaktikanta Das Moulded India’s Fintech As RBI Governor


SUMMARY

Shaktikanta Das’ decisions and statements as the RBI governor made a profound impact on India’s digital economy and the fintech ecosystem

From cracking the regulatory whip on fintech titans to his outright opposition to cryptocurrencies, Das played an important role in shaping the world’s third-largest startup ecosystem

Das will be succeeded by current revenue secretary Sanjay Malhotra, who will take charge as the 26th governor of the RBI

When Shaktikanta Das took over as the 25th governor of the Reserve Bank of India (RBI) in 2018 after the resignation of Urjit Patel, he had big shoes to fill. 

While a lot of jokes were made about his history background at the time of his appointment, Das is finishing his marathon innings at the Mint Street more than half a decade later. His stint would be remembered for the lasting impression it left on India’s economy.

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Das led the country’s economy through some of the most turbulent times, including the Covid-19 pandemic and the global rate hike cycle post the pandemic. During his tenure, Das was also recognised as one of the best central bankers on multiple occasions.

He will be succeeded by current revenue secretary, Sanjay Malhotra. It is worth mentioning that Das also held the same position before he assumed office as the governor of the country’s central bank. 

Das’ decisions and statements during his tenure made a profound impact on the homegrown startup ecosystem as well. From cracking the regulatory whip on fintech titans to his staunch opposition to cryptocurrency, Das was a key centre of influence and played an important role in shaping the world’s third-largest startup ecosystem over the past six years. 

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As his tenure comes to an end, let’s take a look at the key highlights from his stint as the RBI governor that moulded the Indian startup and digital ecosystem.

Shaping India’s Digital Payments Story

When Das took over as the RBI governor in December 2018, India was clocking a mere 52.4 Cr monthly UPI transactions worth INR 82,232 Cr. In a span of six years, policies overseen by him have spurred the digital payments ecosystem and spawned the rise of the fintech sector which caters to users across segments and demographics. 

To tell you the size of the digital payments landscape today, UPI processed a massive 1,548 Cr transactions worth INR 21.55 Lakh Cr in November 2024. The central bank wants to scale the number of daily UPI transactions to 100 Cr in the coming months.

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While the pandemic did give a massive boost to the payments ecosystem, it was the RBI’s “Payment Vision 2021” which set the stage for building a safe, secure, convenient, quick, and affordable online payments infrastructure. 

The central bank’s experiments in the form of regulatory sandboxes and new launches, including UPI 123Pay, NFC-based offline payment modules UPI LITE X, Tap & Pay, among others, brought India’s hinterlands into the fold of digital payments. 

The online payments revolution laid the genesis for digital titans such as PhonePe, Paytm, among others. 

Alongside, differentiated offerings like ‘Credit on UPI’ and push for cross-border payments also helped in making credit available to a big chunk of unbanked Indians and easing payment pangs for those sending cash overseas. 

Aversion To Crypto

In late-2020, when the crypto boom was at its full crescendo, many anticipated virtual digital assets (VDAs) to disrupt the global financial markets. However, Das was outspoken all throughout in his criticism against cryptocurrencies, terming them a  “significant risk” to India’s financial stability. 

At times, he compared the crypto boom to the Tulip mania of the 1800s and, at times, he warned that cryptocurrencies would lead to dollarisation of the Indian economy. His tenure saw the government opt for a heavy taxation regime towards VDAs. 

However, Das also envisaged India’s central bank digital currency (CBDC) as a counter to stablecoins and other online currencies that had no underlying assets. While many fears about crypto came true with the FTX crash in 2022 and multiple issues surfacing at Indian crypto startups, the full-scale rollout of Indian CBDC still remains unclear. 

Regulatory Crackdown On Startups

The latter part of Das’ tenure saw the RBI cracking the whip on fintechs for flouting rules and not complying with existing norms. 

The biggest instance was the central bank barring listed fintech major Paytm’s payments bank associate from offering nearly all services. The RBI cited Paytm Payments Bank’s “persistent non-compliances and continued material supervisory concerns” as the reason behind the move.

More recently in 2024, the RBI also banned Sachin Bansal’s Navi Finserv from sanctioning and disbursing loans over excessive interest rates and non-compliance with its regulations. However, the central bank lifted the curbs on Navi earlier this month.

Previously in 2023, the central bank, via the National Payments Corporation of India (NPCI), directed issuers of prepaid payment instruments (PPIs), both banking and non-banking institutions, to ‘stop UPI in a cobranding arrangement’. This decision had a big impact on many startups

In 2022, the RBI barred non-bank prepaid payment instrument (PPIs) issuers from loading PPIs with credit lines. These directions had a direct bearing on the Indian startup ecosystem, rendering the business models of fintech startups like slice and Uni Cards redundant at the time. 

Keeping A Hawk’s Eye On Digital Lending

Amid rising complaints about digital lending apps and companies, the RBI, under Das’ leadership, formulated guidelines that reined in India’s chaotic digital lending sector, brought transparency and instituted safeguards for borrowers.

His tenure also saw the central bank partnering with the electronics and IT ministry (MeitY) to actively weed out the menace of illegal and fake online lending apps and keeping a check on unruly digital loan sharks. 

Earlier this year, the RBI also announced a public repository of digital lending apps to address issues arising from unauthorised platforms. 

Weaving together online payments with credit offerings, Das also oversaw the roll out of Credit on UPI, paving the way for building a “high-tech, low-cost model” for financial institutions to offer loans and reach the last-mile customer. 

Enforcing Stringent Payment Aggregation Norms

Another key highlight of Das’ stint as the RBI governor was the central bank tightening its noose around payment aggregators (PAs).

In mid-2023, the apex bank rejected the payment aggregator (PA) licence application of 25 existing PAs and 47 applicants on account of multiple reasons, including issues related to system and cybersecurity audits, complex corporate structures and non-compliance with certain thresholds. 

Many like Instamojo buckled under the pressure and had to pivot to a new business model However, sanity returned as startups began reapplying for such licences with renewed gusto and furnishing more data to the regulator. Subsequently, 2024 saw the RBI issuing PA licences in droves, bringing in more transparency in the fintech ecosystem. 

While much remains to be said about his illustrious tenure as the governor of India’s central bank, there is no doubt that Das left an indelible mark on India’s digital economy and the fintech ecosystem. 





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