India Could Become the Fintech Hub of the World

Context: The recent steps taken by the Reserve Bank of India (RBI) and the Ministry of Finance (MoF) provides opportunities to make India the fintech hub of the world.

Recent Steps taken

• By the RBI: Rolled out norms for Financial Market Infrastructures (FMI).

• By the MoF: Allowed unlisted Indian companies to list overseas.

• Government has recently earmarked digital payments as one of seven technology-driven transformation sectors.

FMI and its significance:

• It facilitates the flow of credit and monies to and from consumers, farmers, and businesses during times of stress.
• Ensures effective and efficient functioning of entire macro-financial systems.
• Includes payment systems and services, central securities depositories, settlements, counter-parties and trade repositories, integrated billing platforms and retail payment infrastructures.
• Economic significance: 

• The real-time gross settlement system conducts 77% of all e-payment transactions;
• The Unified Payments Interface has a 64.5% market share in the transaction count;
• The Clearing Corporation of India has a post-lockdown settlement run rate of $4 trillion dollars for securities.

Opportunities for fintech companies

• Due to Overseas Listing:

• Higher valuation multiples and a diverse pool of investors.
• Better risk appetite for tech-driven businesses.
• Global brand recognition;
• Lower currency risks;
• A ready source for foreign currency to facilitate international expansion;
• Better Corporate Governance.
• Buffs up Brand India.
• Not only helps in making India a fintech hub but also the unicorn hub - by leveraging the global bourses to get true value across the digital payments’ spectrum.

• Demand from the neighboring countries for India’s FMI: Robust and low-cost efficient rapid payments system developed by RBI can be deployed in neighboring nations.

• Leads to the erosion of value and strains the management bandwidth.

Negatives of Allowing Overseas Listing: In the absence of proper domestic focus, many companies try to reverse merge into Singapore based entities and list under their more friendly listing rules.

Conclusion: Leveraging the global markets to push domestic competitiveness will lead to India becoming a hub on innovation.