RBI draft norms suggest Fintech SROs to be independent from influence, development oriented

According to the draft norms, SROs for fintech sector is expected to operate objectively, with credibility and responsibility under the oversight of the regulator.

The Reserve Bank of India (RBI) on January 15 in its draft norms said Self-Regulatory Organisations (SROs) for fintech sector should be independent from influence, development oriented, and legitimate arbiter of disputes.

SROs for Fintech sector should also be true representative of the sector, encourage members for adherence to regulatory priorities, repository of information.

According to the norms, SROs for fintech sector is expected to operate objectively, with credibility and responsibility under the oversight of the regulator.

The central bank has invited comments or feedback from stakeholders and members of the public on the draft framework by end of February.

On the eligibility and membership front, draft norms said the applicant should be set up as a not-for-profit company and should have sufficient net worth and demonstrate the capability of establishing the necessary infrastructure to fulfil the responsibilities of Fintech Self Regulatory Organisation  (SRO-FT) effectively, and consistently.

The SRO-FT should put in place systems for managing ‘user harm’ instances that come to its notice or are referred to it by the Reserve Bank or any other stakeholder and should not set up entities / offices overseas without the prior approval of the Reserve Bank, draft norms said.

The applicant SRO-FT should represent the FinTech sector with membership across entities of all size, stage and activities. If representation is inadequate at the time of application, the application should include a roadmap for achieving this within a reasonable timeline.

Membership of the SRO-FT should comprise of members who are FinTechs, and membership should be voluntary. FinTechs would be encouraged by the Reserve Bank to become member of a recognised SRO-FT, draft said.

SRO-FT should set standards for the industry, oversight and enforcement, Grievance Redressal and Dispute Resolution, responsibilities towards the Reserve Bank.

On September 6, 2023, RBI Governor Shaktikanta Das urged fintechs to establish self-regulatory organisations (SRO) over the next year.

"I would like to use this opportunity to urge and encourage the FinTechs to establish a Self-Regulatory Organization themselves," Das said in a speech, at Global Fintech Fest (GFF) 2023.

After this, on October 19, 2023, RBI executive director Ajay Kumar Choudhary said the central bank doesn't want to go for fintech regulations immediately but a self-regulatory organisation (SRO) is likely to come up within this year.

“Everything has to be done in a phased manner. We don’t want to go for Fintech regulations immediately but what the Governor announced is SRO mechanism that is likely to come within this year,” Choudhary said on the sidelines of 18 Annual Summit & Awards, Banking & Financial Sector Lending Companies.