Published on: 4th December 2025
Authored by: Renganathan. V
SASTRA DEEMED TO BE UNIVERSITY
INTRODUCTION
The concept of Fintech that is financial technology evolved during the recent says now 80% of the world are using the digital payments for their day-to-day life, which shows that there is clear change in the traditional financial transaction which was happed physically by the paper and coins. As the technology develops, every aspect of the human being is getting evolved as this concept can be simply understood that financial transaction by using the technology that fintech in short and this concept helps to develop the economy. Fintech have made the life easier and made ease of the e-commerce business as the fintech have rooted he other channel for the payment gateways that even from the foreign countries the remittance can easily happens. And the concept of fintech was started booming in the India as the market of the India was globally wider and the government plays the important role in promoting the Fintech as it contributes much to the government by showing how much the transaction was took place in the business and what is quantum of amount and etc. which helps the government to avoid the tax evasion. And the fintech may also lead to the concept misuse of practice and it became the threat to the government that who has well-versed knowledge in the technology gets the unfair advantage. The accessibility of the fintech in the remote area becomes question, there is need of the regulatory framework the regulation the fintech was mandatory to protect the innovation and interest of the consumer and the govt should held responsible for the protection of the financial stability and fairness. The society in dealing the concept of the Fintech. The fintech may lead the various risk for the government and people like, money laundering, fraud, data privacy and IPR issues, cyber security threats etc.
Regulatory authorities of the Fintech in india
In India there is no single regulatory authority in India to regulate the fintech there are various authorities mainly RBI(Reserve bank of India) and the IRDAI(Insurance Regulatory Development Authority) and the SEBI(Securities Exchange Board of India) are the main regulatory authority to regulate the FinTech in India under there are various sub legislation under the this main authorities to regulate the fintech and there is no codified law in India to regulate the fintech , the laws are fragmented. We don’t have explicit legislation to regulate the concept of fintech lets understand how the fintech was regulated. we have RBI Act of 1934 which play the important role in the governing the fintech however there is no explicit provision under this act that defines the scope of fintech but the section 45I of this act which speaks about the definition where it give definition of various factors that are closely associated with the fintech, and the this the parent legislation that governs the RBI which the parent authority to regulate the fintech. And the powers of RBI like the to call for the information, power to give direction as mentioned in the section 45JA and 45L and power to have supervisory as mentioned under the act etc. are applicable to the fintech also. And this the parent legislation where the delegated legislation like PSSA, and etc are made to regulate the various financial transaction and intermediaries under which the fintech also falls. The PSSA(Payment and Settlement System Act) that is core legislation the regulate the digital payments ,UPI wallets and gateways and the section 4 this act says that no person other than the RBI has the right to deal the payment system the rbi is the sole authority in regulating the payment system in India as mentioned under this act and the definition under this act include the electronic fund transfer which the part of the FinTech The introduction of the digital lending guide lines 2022 was predominantly to regulated the banks and financial institution but they directly govern the partnership of banks with digital lending apps which was unregulated so the rbi guidelines of 2022 is to regulate the fintech that is digital lending apps. The section 17 of the RBI act plays the important role that says lending and advance of money is the main function business of bank here the fintech uses P2P(peer to per) lending which means lending without intermediaries or it uses the digital lending platforms to lend money as the business where it perform the business under this section hence the fin tech are regulated by this act. Therefore the rbi act does not expressly mention about fintech, but the explanation and the nature of the fintech and the powers of rbi can regulate it impliedly.
In the judicial precedent of the cash free payments vs. RBI it was held that the few online digital lending apps that fintech companies does not follow the Payment aggregators norms as the RBI to protect the interest of the consumer the cancelled the licence to those apps and made het cashfree payments as the Payment aggregators by invoking some restrictions. This shows the RBI was regulating the fintech. In the similar judicial precedent of the Paytm payments bank vs RBI it was held that the rbi by using the supervisory power entrusted under the RBI Act 1934 imposed restriction the fintech company on the allegation of non-adherence to KYC (know your customer scheme). This shows that the rbi has the regulative authority of the fintech. The rbi introduction of the ‘enabling framework for the regulatory sand box’2019 plays important role where it promotes the innovation in the financial services and it promote the financial stability. The rbi use P2P as main way of promoting it business as it helps to avoid the intermediaries and it help to save time but in 2019 the RBI have classified P2P as NBFC, and it required the permission from the RBI to start and register the function with RBI.
We can’t avoid the cryptocurrency in the field of the fintech and to regulate the concept of fintech the cryptocurrency and Regulation of Official Digital Currency Bill 2021 was introduced by the Indian govt that have made for the purpose of making official digital currency and imposing some restriction on the private digital currency And the landmark precedent of the internet mobile association vs. RBI the supreme court was held that the business of the virtual currency is the business or the company that fall under the ambit scope of the definition of section 2(20) of the companies act of 2013 and any violation or restriction on such practice of business even by rbi it was held that it violative of the article 19 (g) that is freedom to practice any trade and profession.
With light of above points we can infer that the RBI is regulating the FinTech in India as there is no codified legislation in India.
The other regulatory authority that is IRDAI(Insurance Regulatory and Development Authority of India ) and SEBI(Securities and Exchange board of India) has also playing the vital role in regulating the fintech but they not play as important role like RBI they regulate the business of the fintech on their own field the business of insurance is to indemnify the loss by the way of the monetary compensation however there separate legislation to cover the claim and eligibility of the claim but still the involvement of the monetary compensation and claim is there where the ambit scope of the fintech are required so the plays an important role for the regulation and under the IRDAI the regulation of the registration of the corporate agents 2015 was introduced which says about how the corporate agents, web aggregators, and etc.. to be governed in the insurance market to ensure their conduct and behaviour. It was closely related to the business of the fintech because the intermediaries are of the insurance business are closely connected to the consumer or the beneficiary of the insurance where they use various apps, web and technology to ensure the payment of the premium where the fintech was regulated the IRDAI was promoting the innovation on the business of insurance so the gives a clear way that fin tech companies can play an important role in the insurance business however no explicit connection to the IRDAI provision as the business of the insurance evolves the need of regulation of the fintech in the insurance business is needed.
Similarly there is concept called embedded finance it the important concept how the fintech are growing in every aspect of the human life it means the nature of the business is not related to finance that is lending of the money but in order to develop the business they provide the lending facility as the technology improves there is a need of the regulation. For example, the amazon is the doing the intermediary retail business in the online addition to that they provide the EMI facility also where the nature of the business is not to lend money this concept provides the tremendous growth in the field of fintech.
The role SEBI in the fintech and it has main role in the protection of interest of the investors, the Sebi has introduced the various mechanism in dealing the exchange of the securities through online mode that through demat way where the online technology can’t be omitted from and the payment are happening through the online gate way. Where there is a need of the regulation in addition to that Sebi governs the robo-advisory platforms that means are automated algorithm which help to analyse and take the financial decision and investment. And they are regulated by the Sebi under the SEBI (Investment Advisers) Regulations, 2013 Requires robo-advisory platforms to register as Investment Advisers (IAs) and comply with fiduciary standards. Similarly, the SEBI has introduced the UPI payment gate way for the IPO and SEBI has ensure the safe gateway for the payment through online where there needs a regulation of the fintech. Similarly, the online KYC form has made the process very simple for the investor to do the investment. The SEBI (issue of capital and disclosure requirement) 2018 has ensured the fair pricing, mandate transparent disclosures, efficient allotment processes. These reforms empower fintech platforms to offer end-to-end digital IPO services. In simple the role of Sebi can concluded by saying that exchange of the security that is happening through the online mode for the past 30 years on the digital payments are getting to widen as SEBI is regulatory authority is regulating the FINTECH. But nowhere the explicit definition of the fintech was deliberately made under the SEBI ACT of 1992.
THE ROLE OF THE INDIAN GOVERNMENRT IN PROMOTING THE FINTECH
The Indian govt show the positive response in the development of the FinTech the govt of India has introduced various scheme to make the India to be more advanced in technology the helps to develop the field of the fintech the introduction of the pradan mantri jan dan yojana which primarily focus on the linking the Aadhaar with bank account and through the Aadhaar card the amount can be withdrawn which makes the ease of the payments and it serves as a channel to providing the subsidy to the farmers and etc.. and it also helps to eliminate the intermediary and unwanted cost. Similarly the scheme like the digital India and start up India plays an important role where the government has playing the major role in promoting the innovation by providing the various incentives to develop the nation and contribute to the economic growth this schemes encourage and develops the innovations on the online digital payments and the it ensure the online payment system should be even access by the vulnerable groups and remote area people. And the govt of the India has acting the facilitator for the contribution that come from the abroad and proper channel was laid down by the govt of India which sowing the governance in the fintech.
The India has two main hub of the fintech that was in Gujarat and Maharashtra the gift city was in Gujarat which include the financial institute and the and international financial hub and international financial service centre and it serves as the FinTech incubator and accelerator and it provide guidance and funding for the startups that are established as fintech companies in India which clearly shows the Indian govt shows the positive response to regulate the fintech and similarly the fintech hub in Maharashtra introduced various fintech policy and fintech ecosystem and it help to develop the infrastructure of the fintech
This all the various establishment and policies and schemes that govern the fintech.
CHALLENGES IN REGULATING THE FINTECH
The main challenges in the regulation of the fintech was technological development in the current era the technology is developing like boon and making the old one outdated which may made the any regulation by the govt outdated and another main challenges in the regulation of the fintech was violation of the right of privacy since the fintech company has the details of the consumer even bank and other details the chance of misuse may happen which cause the serious threat to the data pricy act similarly in the case of K.Puttasamy vs. UOI, it was held that the details of the Adhaar should not be infringed and used uncertainly. Which may lead to the violation of the fundamental right of the right to the privacy under the article 21 of the Indian constitution. Another important issue in the regulation of the fin tech was consumer protection and mis-selling remain critical concerns. Fintech platforms may offer misleading advice or bundle products unethically. SEBI and IRDAI have acted against unregistered advisors and digital aggregators, but enforcement remains uneven. The majority of the fintech was an MNC and they have business globally the jurisdiction issues are main hinderance in the regulation of the fintech in the notable case of the Paytm Payments Bank case (2022), where RBI barred new customer onboarding due to KYC and data governance lapses, highlighting the difficulty of enforcing uniform standards. This all the various challenges in regulating the Fintech. Another major hurdle is fragmented regulatory oversight. Fintech often operate across payments, lending, insurance, and investments each governed by different bodies like RBI, SEBI, and IRDAI. this might lead to overlapping compliance burdens and regulatory ambiguity. A notable example is the Paytm Payments Bank case (2022), where RBI barred new customer onboarding due to KYC and data governance lapses, highlighting the difficulty of enforcing uniform standards.
Conclusion
The fintech is the emerging field in the India and this the article primarily focus on the regulatory framework of the fintech we have analysed various authority and their legislative framework include RBI, IRDAI, SEBI and etc. under which we saw various sub legislation how they help to govern the fintech in India and we can conclude this article by saying that laws that governed the fintech was very fragmented means there is no single codified laws to regulate the concept of fintech and they action of the Indian govt clearly shows that they was very much interested in the development of the business of the fintech which clearly shown in the various scheme and addition to that the establishment of the major fintech business two states shows the need of the fintech business and ultimately the fintech business is going to help the India by developing the economic and since the this was very new the govt should ensure there is no chance of misuse or fraudulent act that occurs in addition to that now the UPI payments are grown like boon the issues of IPR also arise in the recent issue between to main digital apps in their suffix name that is pay so lot of new issues as technology grows arise so the govt should ensure that the codified law should be enacted and that law should easily adopt the dynamic technological advancement so that the regulation of the fintech become easier.
