The Reserve Bank of India has proposed a framework for self-regulatory organisation for fintech companies aimed at setting standards for the industry, oversight and enforcement, grievance redressal, and dispute resolution.
“By pivoting towards a culture of self-governance, FinTechs could proactively set and adhere to industry standards and best practices. This approach could empower the sector to demonstrate its commitment to responsible conduct and innovation even in the absence of formal regulation. Through collaboration, the industry could collectively identify and address challenges, foster an environment where innovation flourishes, and guide a shared commitment to ethical business practices. Self-regulation also offers the advantage of adaptability to rapid technological advancements and evolving market dynamics,” the RBI said on Monday.
Eligibility
On eligibility and membership, the draft norms said the applicant should be set up as a not-for-profit firm and should have sufficient net worth, and demonstrate the capability of establishing the necessary infrastructure to fulfil the responsibilities of SRO-FT.
To maintain credibility, the SRO-FT should operate independently, free from the influence of any single member or group of members, according to the RBI’s draft. “This would ensure unbiased decision-making and prevent the organisation from being swayed by the interests of a dominant few. The SRO-FT should maintain impartiality, avoid conflicts of interest, and ensure unbiased oversight over its members. Independence would enhance the reputation of the SRO-FT as a neutral and reliable entity, essential for gaining the trust of both industry participants and regulators,” it added.
The applicant SRO-FT should represent the FinTech sector with membership across entities of all sizes, stages, and activities. If representation is inadequate at the time of application, the application should include a roadmap for achieving this within a reasonable timeline. Failure to demonstrate or attain comprehensive membership could result in the denial or revocation of recognition.
The Reserve Bank would invite applications for the SRO for the FinTech sector, either for the entire sector or for specific sub-sectors, as and when required. The number of SRO-FTs to be recognised would be considered based on the number and nature of applications received.