A committee set up by the Reserve Bank of India (RBI) on Thursday recommended that the government consider offering tax-based incentives to merchants to encourage the adoption of digital means of payments in the country. “Given that fintech companies are in their infancy but are growing at a rapid pace, the government may consider introducing tax subsidies for merchants that accept a certain proportion of their business revenues from the use of digital payments as opposed to cash,” said the report of the inter-regulatory working group on fintech and digital banking, chaired by Sudarshan Sen, executive director, RBI. The report also emphasised the need for a data protection law in the country, stating that while sections under the Information Technology Act, 2000, provide for redressal in instances of data breach, the protections guaranteed by them are often subject to the particular terms of a contract between two parties. “…that data protection is generally governed by the contractual relationship between the parties, and the parties are free to enter into contracts to determine their relationship defining the terms personal data, personal sensitive data, its dissemination, etc,” the report stated.
“As such, it may be necessary to emphasise the need for an exhaustive stand-alone legislation on data protection in India keeping in mind the innovations in fintech and risk to personal data which comes to the possession of these entrepreneurs.”
The committee said that there is a need to develop a deeper understanding of various fintech products and their interaction with the financial sector before regulating the space. ‘The regulatory actions may vary from ‘’disclosure” to “light-touch regulation and supervision” to a “full-fledged supervision”, depending on the risk implications,’ the report said.