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Highlighting implementation challenges with the Digital Lending Guidelines to the Reserve Bank of India (RBI)
Highlighting implementation challenges with the Digital Lending Guidelines to the Reserve Bank of India (RBI)

January 30, 2023

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On January 18, 2023, we wrote to the RBI highlighting the impact on the Information Technology (IT)/IT enabled Services (ITeS) industry of the broad data localisation mandate under the RBI's Digital Lending Guidelines (DL Guidelines).

This is in furtherance of our earlier submission to the RBI highlighting the challenges being faced by the industry in the implementation of the DL Guidelines, with respect to the involvement of thrid parties in flow of funds and the broad data localisation mandate. 

In the current submission, we have highlighted the imapct of a broad data localisation mandate on the Information Technology (IT)/IT enabled Services (ITeS) industry. IT/ITeS companies provide various technology services to fintech companies who are in the business of digital lending, for example, cloud hosting services, Software as a Service (SaaS), high-end technology services (such as quantum computing) etc. One of the features of a SaaS service is that the best resources and computing capacities can be utilised at a low cost, irrespective of the geographical location of the beneficiary. To process data in a SaaS solution, it needs to be transferred to servers on which the SaaS solution is hosted. In many instances, these SaaS solutions are hosted on a cloud, and the servers are not located in India. It is not possible for IT/ITeS companies to offer services at a competitive cost, if the mandate is to store all data in India only.

Ultimately, this will lead to higher operational costs on REs, DLAs and LSPs, thereby making it harder for incumbents to invest in innovation and for new-commers to enter the market.

This is also not in-line with RBI’s 2018 notification which requires only data relating to payment systems operated to be stored in India.

Recommendation:
We have requested the RBI to explain the reasons for a broad data localisation requirement under the DL Guidelines and to deliberate with the industry before such a requirement is implemented so that alternative risk mitigation measures may be discussed and evaluated.

For more information, kindly write to garima@nasscom.in


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Garima Prakash
Manager, Public Policy and Government Affairs

Reach out to me for all things policy about e-commerce, international trade, export controls, start-ups and fintech

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