RBI finalises framework for self-regulatory organisations in fintech sector | News
An SRO is a non-governmental organisation that acts as a bridge between industry players and the regulator. It also sets standards for the conduct of entities operating in the country
Ajinkya Kawale Mumbai
The Reserve Bank of India (RBI) on Thursday released the final framework for recognising self-regulatory organisations for the fintech sector (SRO-FT), nearly five months after the banking regulator released draft norms for such entities. The framework states that SRO-FTs will play a pivotal role in ensuring compliance with statutory and regulatory frameworks.
“Its responsibilities towards RBI should broadly encompass relaying sector-specific insights, addressing regulatory concerns, and collaboratively working towards the overall development of the fintech sector,” said the RBI.
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In terms of the structure of the SRO, the RBI mentions that it should be set up as a not-for-profit company registered under Section 8 of the Companies Act, 2013. The shareholding of an SRO-FT should be diversified, and no entity should hold 10 per cent or more of its paid-up share capital.
It further stated that applicants will be required to have a minimum net worth of Rs 2 crore within a year of being recognised as an SRO-FT.
Organisations such as the Digital Lenders Association of India (DLAI) and the Fintech Association for Consumer Empowerment (FACE) are some of the leading bodies in the race to become an SRO-FT.
The central bank will soon initiate the process of recognising SROs in the fintech sector, and entities meeting the eligibility conditions and requirements of the SRO-FT framework may submit an application with the regulator.
An SRO is a non-governmental organisation that acts as a bridge between industry players and the regulator. It also sets standards for the conduct of entities operating in the country.
RBI has asked that the SRO be built on a ‘representative’ structure, which would enable it to draw upon the collective expertise and experience of its members, resulting in the development of standards that are pragmatic, adaptive, and widely accepted within the fintech community.
Such entities should represent the fintech sector with membership across entities of all sizes, stages, and activities, the RBI said.
On grievance redressal, SRO-FTs will be required to establish a dispute resolution framework for their members.
These entities will be a representative voice of their members during engagements with the banking regulator.
“In such engagements, it would be expected that the SRO-FT functions beyond the self-interest of specific members and addresses larger concerns of the fintech sector,” the RBI said.
SRO-FTs will be required to update the RBI on fintech developments and notify it of violations by their members on matters related to regulations or systemic issues within the space.
They will be required to collect updated sectoral information and share the same with the RBI to aid in policy making.
