TLDR:
– The Reserve Bank of India (RBI) has issued draft norms for setting up self-regulatory organizations (SROs) for fintech companies.
– The draft framework outlines the functions, governance standards, and eligibility criteria for SRO-FTs.
– The RBI has left it to the industry to decide whether there should be a single SRO or multiple SROs.
The RBI has released a draft framework for self-regulatory organizations (SROs) for fintech companies in India. The framework lays down the broad functions, governance standards, and eligibility criteria for setting up an SRO-FT. While the RBI has invited applications for SROs, it has left it open for the industry to decide whether there should be a single SRO or multiple SROs. The number of SROs to be recognized will be determined based on the number and nature of applications received.
The draft norms highlight that the SRO-FT should operate independently, free from the influence of any single member or group of members. It also outlines the need for standards, oversight, enforcement, grievance redressal, dispute resolution, and responsibilities towards the RBI. The eligibility criteria include being set up as a not-for-profit organization with sufficient net worth and the capability to establish the necessary infrastructure. The RBI has also raised questions about the incentives for membership, representation, and the composition of the SRO-FT board.
Overall, the draft norms aim to establish a framework for SROs that strike a balance between facilitating innovation in the fintech sector and meeting regulatory priorities to protect consumers and contain risk. The RBI recognizes the role of SROs in regulating the industry while not hampering innovation and growth. The industry has welcomed the move, with the Digital Lenders Association of India expected to apply for the SRO status once the process begins.
