Why This Set Of Fintech Firms Need To Worry About RBI's New Card Guidelines

Fintech firms which offer credit card-like products could be looking at a tougher operating environment as the Reserve Bank of India's latest guidelines on card issuances come into effect.

The RBI's move comes amid the regulator's concerns that too many technology firms are entering the formal financial services business without adequate approvals in place.

According to the head of retail banking at a large private bank, the regulator wants to institute a framework where each of these fintech firms will need to come and seek a formal approval. This will give the RBI some insight into each of these companies and the quality of their technology, the banker said.

"The RBI's guidelines have come at a time when there is increased noise around mis-selling of cards, ultimately putting customers in a debt trap. These guidelines will help protect cardholders' interest and regulate the conduct of card companies that are aggressively pushing cards," said Anand Dama, senior research analyst at Emkay Global Financial, in an April 22 note.

According to R Gandhi, former deputy governor at RBI, the latest guidelines will also help reduce regulatory arbitrage.

"These new guidelines are an updated version of existing guidelines, with added clarity," Gandhi said. "This clarity may impact some fintechs who have earlier built their businesses in this space."