The financial services play of big tech raises systemic risks such as overleverage: Shaktikanta Das, Governor of the Reserve Bank of India

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The introduction of huge digital businesses into the banking sector, according to RBI Governor Shaktikanta Das, raises systemic problems such as overleveraging on the part of borrowers.

Big tech giants such as Google, Amazon, and Facebook (Meta) have entered the market, raising concerns about competitiveness and data protection.

“They (big tech) come with dangers that need to be carefully examined and handled with,” Das said at the Financial Express’ Modern BFSI Summit 2022.

E-commerce, search engines, and social media platforms are examples of organisations that have begun to offer financial services in a “major way” on their own or through partnerships, he said, adding that this is leading to the usage of new credit evaluation procedures.

“Such widespread adoption of new credit evaluation procedures might lead to systemic issues such as overleverage, insufficient credit assessment, and other hazards,” he noted.

The use of harsh recovery tactics such as contacting at odd hours or using bad language, according to Das, is “inappropriate,” and he stated that the RBI is paying “close attention” to such incidents to ensure that required action is done to stop them.

He stated that while the majority of such incidents originate from unregulated businesses, the central bank has also seen such techniques utilised by entities regulated by the RBI, and asked all participants to pay special attention to the issue.

The remarks come at a time when numerous debtors have been accused of committing suicide as a result of aggressive collection efforts by agents.

The central bank will continue to support innovation while attempting to address systemic issues, he added, adding that a discussion paper on digital lending will be released soon.