Speaking
at a recent symposium on "India's Changing Financial Landscape",
Singapore’s Minister for Education (Higher Education and Skills) and Second
Minister for Defence, Mr Ong Ye Kung provided
an overview of important developments in India’s financial landscape,
Singapore’s initiatives in the Fintech area andoutlined potential areas
of cooperation between the two countries’ financial sectors. He noted that
Fintech is possibly the most exciting area for cooperation.
Developments and policy decisions in
India
To improve financial inclusion, the Indian
government launched the ‘Prime Minister’s People Money Scheme’ (Pradhan Mantri Jan Dhan Yojana) in
August 2014 aiming to provide universal access to basic banking, insurance and
pension facilities for Indian citizens, particularly amongst the lower-income
groups.
Today, more than 300 million people have
benefitted from this scheme, with US$12 billion being deposited into the
banking system. They are able to receive government subsidies directly into
their bank accounts and to access a host of basic financial facilities and
services.
The banking regulator, the Reserve Bank of
India (RBI) issued new banking licenses to the IDFC Bank and Bandhan Bank, in
April 2014, the first in the past ten years. The RBI also introduced two new
classes of banking licenses – payment banks and small finance banks. This would
enable smaller, nimbler players to offer services to remote community areas,
underserved urban segments and small and medium enterprises (SMEs) that have
difficulty accessing banking services.
Under these new licences, payment banks
will offer last mile connectivity through mobile phones, offering small savings
account, easy payment and remittances services.
Minister Ong also highlighted insolvency
resolution as another area of major change. In 2016, the Indian parliament
enacted the Insolvency and Bankruptcy Code as part of an overhaul of the
insolvency resolution regime in India. Under the old regime, it took an average
of 4.3 years to resolve an insolvency case in India. The Code consolidated and
streamlined various unwieldy laws relating to insolvency resolution under a
single legislation. Companies are subject to a 270-day time limit to implement
a resolution plan.
This is part of a suite of economic reforms
undertaken by the Indian government to make the country a more attractive
investment destination, and to encourage enterprise and entrepreneurship. As a
result, in the latest World Bank report, India climbed 30 points in the ‘Ease
of Doing Business’ ranking, entering the top 100 for the first time.
In July 2017 India implemented the Goods
and Services Tax (GST), which subsumes all indirect taxes that were levied on
goods and services and unified 17 state and federal taxes, thereby creating a
single market within India.
The Indian Government withdrew all existing
500 and 1,000 currency notes in November 2016, as part of its attempt to
eliminate the circulation of black money in the informal economy. This led to
some hardship and disruption – particularly amongst the rural community where
most transactions are cash-based – but it helped to accelerate the digitisation
of financial services in India.
The digitalisation of financial services
and the ubiquity of mobile devices are changing the way financial services are
consumed and delivered in India, said Minister Ong. This has enabled the entry
of a new generation of FinTech firms offering a wide range of financial
services. The Minister mentioned examples such PayTM and MobiKwik in mobile
payments, and BankBazaar in personal finance management.
Fintech
ecosystem in Singapore
The Singapore Government has put
in place several programs and initiatives to foster the development of
Fintech.
The Monetary Authority of Singapore created
the regulatory sandbox in 2016 to facilitate live experimentation of new ideas
in a contained environment. These may be in the form of untested technology or
unconventional business models. Within
the sandbox, some regulations are suspended for the Fintech firm, for a
stipulated period.
One example is TransferFriend, a start-up
that uses blockchain and data analytics to offer a secure and low-cost
remittance service. Another example is PolicyPal, a start-up that helps
consumers organise, understand and purchase insurance policies digitally
through a mobile app. PolicyPal has since graduated
from the sandbox, and is now an insurance broker registered with MAS.
The Singapore Government also recognises
that Fintech is unbundling the financial services value chain, and regulations
have to be right-sized accordingly. Hence, the Government is streamlining regulatory
treatment of payments services and remittance services through a law to be
introduced by the end of the year, switching to an activity-based, modular
framework, from the current entity-based approach. Currently, there are
separate regulations for payment systems and stored value facilities, and for
remittance businesses.
The modular approach will allow the Government
to regulate new business models that offer one or only some parts of the
payments value chain in a more targeted manner. Ensuring that the regulations
are proportionate to the risks of the activity will encourage new ideas, new
business models and flourishing of innovation and enterprise.
Singapore has a Fintech innovation hub,
located in the central business district, to house Fintech startups. Singapore
is also investing in the development of talent
in artificial intelligence, data and computer science. The Minister highlighted
the recent establishment
of an AI research centre at Nanyang Technological University by Alibaba.
Collaboration
opportunities
Using
digital platforms to reach out to underserved communities
Minister Ong cited a joint study conducted
by the Associated Chambers of Commerce of India and Ernst and Young that reported
that around 19 per cent of the population in India still does not have access
to the formal banking system. Singapore banks can reach out to these communities,
particularly through digital platforms.
In 2016, DBS launched Digibank, a
mobile-only bank in India. Digibank has no physical branches and utilises a
suite of biometrics and AI technologies to provide digital banking services to
consumers. Within two years, more than 1.5 million customers have signed up for
Digibank, and the customer base is expected to grow to five million by 2021.
Infrastructure
financing and insurance sector
India will need an estimated US$1.5
trillion over the next 10 years for infrastructure financing, far exceeding the
capacity and appetite of the banking sector. infrastructure projects seeking
long-term institutional funds can also look to leverage the strong
infrastructure financing ecosystem in Singapore, comprising multilateral
development banks, private financiers, lawyers, accountants, and other
professional services.
Till 2016, only 30 per cent of the Indian
population was covered under life insurance India is the most exposed country
in the world to natural disasters. This risk is further exacerbated by rising
urbanisation in India, as larger communities are now concentrated in small
populated urban centres, many of which lack adequate infrastructure. As the
leading insurance and re-insurance hub in Asia, Singapore is also well placed
to help address India’s risk management needs.
Fintech
Minister Ong said that the development of
Fintech has opened up new frontiers for cooperation between Singapore and
India.
NETS, Singapore’s key domestic payment
system operator in Singapore, is working towards
establishing a payment linkage with the National Payment Corporation of India,
or NPCI. NPCI is an
umbrella organisation for operating retail payments and settlement systems
in India. It is an initiative of RBI and Indian Banks’ Association
(IBA) under the provisions of the Payment and Settlement Systems Act,
2007, for creating a robust Payment & Settlement Infrastructure in
India.
In the coming year, a NETS holder in
Singapore will be able to make online purchases on any NPCI e-commerce merchant
website in India. In time, NETS users will be able to make payments at all 2.8
million RuPay point of sale terminals in India. Conversely, RuPay users will be
able to make payments at all of NETS acceptance points in Singapore.
The Singapore Government is also working
with the State Governments of Andhra
Pradesh and Maharashtra
to bolster cooperation on innovation and blockchain technologies, including
cross border payments.
Minister Ong concluded, “I have highlighted
a number of significant changes in India’s and Singapore’s financial landscape
in the last decade. Technology, in particular, has been a key driver in this
transformation. It has also opened up new and exciting opportunities for
collaboration between our two countries. Done well, these initiatives will have
a far-reaching positive impact on India – as well as Singapore, for the long
term.”
