Fintech panel for legislative changes for issuance of FDs, other instruments in demat form


An inter-ministerial panel on fintech has suggested legislative changes be made to enable fixed deposits (FDs) and other financial instruments to be issued in dematerialised form as it is customer-friendly and secure. The Steering Committee headed by the Economic Affairs Secretary also suggested that the Department of Financial Services (DFS) and Reserve Bank of India may examine the suitability of ‘virtual banking system’ in the Indian context.

The panel, which submitted its report to Finance Minister Nirmala Sitharaman on Monday, said dematerialisation of financial instruments is customer-friendly given the wide reach of mobile technologies and also leads to disaster resilience and speedy recovery.

It recommended that suitable regulatory and legislative changes be made to enable FDs and other financial instruments to be issued in dematerialised form and allow their frictionless use as collateral.


The government should undertake a campaign to convert all financial assets held, especially by entities under its control like post offices, in demat form as far as possible but certainly in electronic form, the report said.

“Necessary suitable amendments to enable dematerialisation of financial instruments such as FDs and other deposits of the Post Offices, other forms of small savings certificates issued, Gold Deposit Certificates issued under GMS, Sovereign Gold Bonds, etc. may be undertaken,” it said.

Pending changes in laws and regulations that may be required to enable depositories to store all financial assets, the information pertaining to the assets may be stored in repositories so that consumers can access this information through a single window, it said.

With regard to virtual banking, it said the Hong Kong Monetary Authority (HKMA) has recently issued guidelines for setting up virtual banks and is examining applications for virtual banking licences.

DFS and RBI can examine the issue and prepare for a possible future scenario where banks do not need to set up branches and yet deliver the full scale retail banking services ranging from extending loans, savings accounts, issuing cards and offering payment services through their app or website, it said.

The panel also made a case for increasing pre-paid instruments (PPI) limit from the existing Rs 1 lakh.

“The Committee recommends a thorough review of the PPI system with a view of considerably liberalising its use with adequate non-monetary limits safeguards to enable expansion of fintech,” it said.

It noted that there is an urgent need to reduce the costs of KYC to promote financial inclusion among the weaker sections.

While large financial institutions can afford to pay for uploads, this may not be affordable for small players, it said, adding the cost of on-boarding a customer is an expensive proposition and the new banks are at a serious disadvantage.

The panel suggested that there should be no charge for uploading KYC data, while every download can be priced based on the user pays principle and this will enable Central KYC to take off early.

Other members of the committee include Secretary Financial Services, MSME Secretary, UIDAI CEO and Deputy Governor of RBI.

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