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. \u201cGiven 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,\u201d 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. \u201c.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,\u201d the report stated. \u201cAs 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.\u201d 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. \u2018The regulatory actions may vary from \u2018'disclosure\u201d to \u201clight-touch regulation and supervision\u201d to a \u201cfull-fledged supervision\u201d, depending on the risk implications,\u2019 the report said.