RBI releases guidlines for SROs of Fintech Sector
RBI released a ‘Draft framework for recognizing Self-Regulatory Organizations (SRO) for the FinTech Sector’ on January 15, 2024, and invited comments and feedback from stakeholders.
The Reserve Bank of India (RBI) has released a framework for Self-Regulatory Organisations (SROs) for the fintech sector. According to the guidelines, SROs should be development-oriented, true representatives, and legitimate arbiters of disputes.
Additionally, SROs for the fintech sector should also be independent of influence, encouraging members to subscribe to regulatory expectations and repository of information. The oversight framework should be activity-based, risk-based, scale-based and phased-in as well.
The self-regulatory organizations (SRO) would be industry-led and will be responsible for establishing and enforcing regulatory standards, promoting ethical conduct, ensuring market integrity, resolving disputes, and fostering transparency and accountability among its members.
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SROs should be one built on a ‘representative’ structure, which would enable it to draw upon the collective expertise and experience of its members, resulting in development of standards that are pragmatic, adaptive, and widely accepted within the fintech community.
The SRO-FT should establish systems to manage instances of "user harm" that come to its attention or are referred to it by the RBI or any other stakeholder. These instances may include fraud, mis-selling, unfair practices, unauthorized transactions, or any other form of misconduct that harms consumers of financial services.
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The SRO must have a diversified shareholding, with no single entity or group of entities holding 10 percent or more of its paid-up share capital. Additionally, the SRO can include fintech companies based outside India as its members.
The SRO-FT should not set up entities/offices overseas without the prior approval of the RBI and membership in the SRO-FT should be primarily from fintechs that are currently not regulated by any financial sector regulator.
The number of SRO-FTs to be recognized would be considered based on the number and nature of applications received.
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