The Reserve Bank of India (RBI) has released a detailed framework to recognize Self-Regulatory Organisations (SROs) within the burgeoning fintech sector. This framework aims to foster self-regulation, promote best practices, and ensure a balanced and adaptive regulatory environment.
The newly published “Framework for Recognising Self-Regulatory Organisation(s) for FinTech Sector” outlines the criteria, characteristics, and responsibilities of SROs. It emphasizes the need for fintech entities to establish industry standards, ethical conduct, and compliance with regulatory requirements.
Key highlights of the framework
1. The SRO must represent the diverse fintech sector, including non-banking financial companies and peer-to-peer lending platforms, but excluding banks. The framework encourages fintech entities to join at least one SRO to ensure inclusivity and comprehensive representation.
2. The SRO is tasked with fostering the growth and evolution of the fintech sector. This includes setting minimum eligibility criteria, providing training programs, and guiding early-stage entities to navigate the regulatory landscape.
3. To maintain credibility, the SRO must operate independently, free from the influence of any single member or group. This ensures unbiased oversight and enhances trust among industry participants and regulators.
4. The framework mandates that the SRO establish transparent and fair mechanisms for dispute resolution and consumer protection. This involves addressing grievances and ensuring that members adhere to high ethical standards.
5. The SRO is expected to facilitate communication between the fintech industry and the RBI, advocate for necessary changes, and promote a culture of compliance. It should also act as a repository of information, providing valuable data for industry research and policy making.
Eligibility criteria: Entities seeking recognition as an SRO must be set up as not-for-profit companies, possess a minimum net worth of Rs 2 crore within a year of recognition, and demonstrate the capability to establish necessary infrastructure. The SRO must also have a robust IT system and manage ‘user harm’ instances effectively.
Functions and responsibilities: The SRO’s responsibilities include setting industry standards, promoting responsible innovation, providing training and support, and ensuring members comply with regulations. The SRO must also establish a framework for grievance redressal and dispute resolution, ensuring a fair and transparent process.
For more details, visit the RBI’s website.
