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Bloomberg Opinion

14 Dec, 9 tweets, 4 min read

@andymukherjee70

The outmoded licensing regime in India needs to be brought up to date with digitization trends in the broader economy, writes @andymukherjee70 trib.al/BchfEYF

No deposit-taking institution in the world is trusted more by savers and enjoys a bigger cachet with investors than HDFC Bank.

This has made India’s most valuable lender so lethargic that it had to be banned from issuing new credit cards for eight months trib.al/PNtzgBM

Bank licenses are permits to make money out of thin air.

The prospect of sharing the privilege with a new breed of digital rivals will be more effective at keeping HDFC Bank and other traditional financiers on their toes trib.al/PNtzgBM

The Reserve Bank of India should ask why it has to do the market’s job of pushing firms to embrace best-in-class technology.

The country’s licensing policy for financial institutions is past its sell-by date trib.al/PNtzgBM

New technologies are reshaping the financing landscape.

From nothing five years ago, Indians now pay and receive 7.7 trillion rupees ($102 billion) a month via apps running over a shared public utility trib.al/PNtzgBM

Since innovation originated in payments, financiers didn’t pay attention.

Uday Kotak, chairman of Kotak Mahindra Bank, said recently, “Bankers were short-sighted. Their standard response was, ‘Oh, there’s no money in payments.’”

But there is now trib.al/PNtzgBM

About 20% of online payments over the shared public network are being collected by merchants.

They’re shunning costly credit-card systems, but are keen to use their online sales data as information collateral to get working-capital loans trib.al/PNtzgBM

A licensing regime that has fallen behind technological innovation has caused a regulatory vacuum.

An RBI working group estimates the number of illegal digital lending apps in India at 600 trib.al/PNtzgBM

The outmoded licensing regime in India needs to be brought up to date with digitization trends in the broader economy.

It’ll force traditional players to shed their lethargy, and show a more certain path to profitability to well-capitalized fintech trib.al/PNtzgBM

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