India Banking Research

Fintech is generally considered a force for good in India, which has a large unbanked population and is eager to use digital financial technology to boost financial inclusion. But not all fintechs are created equal. And not all fintechs have such noble intentions.

India fintechs have begun lending money to people who can't get bank loans because they lack a credit history, the one they have does not instill confidence in lenders, or the banks just don't want to make personal loans. Of course, the lenders want to be sure they get their money back. And just as they can use borrower data to make a decision about whether to approve an applicant's loan, they can use that same data for debt collection. Here's the rub: That practice is often illegal in India, as well as in the United States, where some of startups' key investors are located.

India is the world's largest recipient of remittances. In 2018, Indians overseas sent home a record US$79 billion, according to the World Bank. The majority of remittances to India originate in the wealthy Gulf states of the Middle East, where there are many Indian workers. The No. 2 source of remittances to the subcontinent is the United States, followed by the United Kingdom, Malaysia, Canada, Hong Kong, and Australia.

Given the size of India's remittances market, there is a significant opportunity for fintechs, especially as the typical cost of sending remittances remains high. Fintechs who could offer remittances on the blockchain for a fraction of the fee of banks or other transfer services could tap a potentially lucrative market.

Indian fintech giant Paytm is reportedly in talks to acquire the Mumbai-based insurtech firm Coverfox for $100-$120 million in cash. If the acquisition is a success, it will be the largest by Paytm and mark the firm's arrival to India's insurtech segment with a bang, posing a direct challenge to market leader Policybazaar.

The Indian central bank, the Reserve Bank of India (RBI) is considering the possibility of introducing a fiat cryptocurrency in the country.

As the Indian economy grows rapidly, there is an opportunity to bring ever larger number of Indians into the banking mainstream through both public and private banks.

The recent move by the Indian Government to ban the old Rupees 500 and 1000 notes has created turbulence far beyond what was imagined and planned for. The intent was laudable, as the Indian Prime Minister Narendra Modi sought to curb growing corruption in the economy. However, the lack of preparation on part of the central bank, the Reserve Bank of India (RBI), and the commercial banks has meant that the citizens have been left in the lurch.

On Oct 6th, the Reserve Bank of India (RBI) released the operating guidelines for Payment Banks (PBs) and Small Finance Banks (SFBs).

On September 4th, Urjit Patel officially became the new central bank chief in India. He succeeded Raghuram Rajan, who was famous for largely stabilising the economy during his three year term. Under Patel's leadership, the Reserve Bank of India (RBI) is expected to continue the current policy regime.

The recent introduction of offline mobile banking apps in India underlines the determination by both government and private banks to push financial inclusion in India and is a strong signal that India is ready to embrace fintech and innovation to solve complex problems within its banking network.

In its August 2016 report on the use of Unstructured Supplementary Service Data (USSD) for mobile financial services, the Telecom Regulatory Authority of India (TRAI) conceded that their attempts to replicate the success of USSD mobile financial services in other nations, such as Kenya’s M-Pesa, and provide banking solutions for the underbanked, had failed.

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