Fintechs have welcomed the central bank’s draft framework for self-regulatory organisations (SROs), as it will provide a bridge to promote responsible innovation while adhering to all the regulations.
Industry experts feel that the formation of an SRO will open up possibilities for greater collaboration among industry stakeholders as well as with the regulatory body.
The Reserve Bank of India has issued a draft framework for self-regulatory organisations focused on the fintech sector (SRO-FT). The main idea behind the guidelines is to empower the fledgling sector to function and innovate responsibly even in the absence of formal regulations.
Bridge to promote innovation
“We believe that the SRO will provide a bridge to promote responsible innovation while adhering to all the regulations. This will be a crucial step in protecting customer interests and mitigating risk for the overall industry, which in turn will enhance digital trust in the ecosystem. Operating under the oversight and guidance of the RBI, the fintech sector is expected to witness an elevation in regulatory compliance standards,” said Ankit Ratan, co-founder and CEO at Signzy.
“The SRO-FT should play a crucial role in promoting responsible innovation by providing a framework that encourages responsible experimentation,” said the RBI, highlighting the need to balance innovation and regulations.
SRO should be responsible for addressing cases of grievance, conflict of interest or dispute among its members, the RBI added.
Fintech SRO will act as a unified voice of the industry and work towards putting forward collective concerns and addressing challenges, remarked Ashish Goyal, co-founder and CFO of Fibe.
“The formation of an SRO will open up possibilities of greater collaboration among industry stakeholders as well as with the regulatory body, leading to a more transparent and secure ecosystem for consumers. Given the dynamic nature of the fintech industry, the formation of an SRO and adherence to industry standards will not only lead to responsible innovation but also safeguard the interests of consumers,” said Goyal.
This is the second attempt by the RBI to create an SRO for the sector. In 2020, the financial sector regulator released guidelines for a payments SRO. While a few entities have applied for the licence, final approval from the RBI is still awaited.
The regulator has kept the provision for multiple SROs in the sector but wants every SRO to have adequate members from across the spectrum, like payments and lending.