The Reserve Bank of India (RBI) has unveiled draft norms for fintech self-regulatory organizations (SROs). In which emphasis on representative membership, independence and active participation is prominent.
The Reserve Bank of India (RBI) has unveiled a draft framework for setting up and recognition of Self-Regulatory Organizations (SROs) in the FinTech sector. The draft rules aim to promote innovation within the industry and ensure regulatory priorities for consumer protection and risk prevention.
Features of Self-Regulatory Organization for Fintech (SRO-FT)
1. Representative Membership
- Membership should be voluntary and should include fintechs to ensure broad industry representation.
- The SRO-FT should be acknowledged as the primary body for setting market standards and defining rules of conduct.
2. Development oriented
- To actively contribute to the development of the industry by providing expertise, guidance and capacity-building programmes.
- To set minimum eligibility criteria for members to raise industry standards.
3. Independence and impartiality
- Acting independently to ensure impartial decision making.
- Avoid conflicts of interest and maintain impartiality in oversight to prevent influence of any prominent member or group.
4. Dispute Resolution
- To establish a transparent and impartial dispute resolution mechanism to be treated as a legitimate arbitrator.
- To create confidence in the industry through reliable conflict resolution.
5. Active participation
- Motivating members to align with regulatory priorities.
- To facilitate communication between industry players and regulatory bodies to promote necessary changes and compliance culture.
6. Information Store
- Collect, analyze and disseminate relevant data about members' activities.
General Requirements
- The SRO-FT should be set up as a not-for-profit company under Section 8 of the Companies Act, 2013.
- Demonstrate sufficient net worth and capacity for effective infrastructure.
- Maintain a strong IT infrastructure and deploy technical solutions promptly.
- Taking prior permission from RBI for setting up institutions/offices abroad.
Membership Criteria
- Representing the FinTech sector with a membership of entities of all sizes, stages and activities.
- To include a roadmap for achieving comprehensive membership within a reasonable timeframe.
Work
- Guide member conduct, ensure adherence to standards and laws, and resolve complaints.
- To formulate a code of conduct, industry standards and basic technology standards.
- Developing standardized documents for specific needs within the FinTech sector.
governance standards
- The Board of Directors (BOD) and Key Managerial Personnel (KMP) should possess professional competence, impartiality and integrity.
- Adhering to appropriate and proper norms.
- To follow guidelines for transparency, accountability, integrity and fairness.
- To permit RBI to nominate or appoint observers on the SRO-FT Board, if necessary.
Important facts for all competitive exams
1. RBI Draft Criteria for Fintech SROs:
- RBI releases draft framework for fintech self-regulatory organizations (SROs).
- SRO-FT membership will be voluntary and representative of the FinTech sector.
- The focus needs to be on balancing innovation, consumer protection and risk control.
2. Features of SRO-FT:
- Representative Membership.
- Development oriented for industry growth.
- Independence, impartiality and transparent dispute resolution.
- Active engagement with regulatory priorities.
- Information repository for relevant data.
3. General Requirements:
- SRO-FT is a not-for-profit company under Section 8 of the Companies Act, 2013.
- Demonstrate substantial net worth and strong IT infrastructure.
- Obtain RBI approval for foreign entities/offices.
4. Membership Criteria:
- Representation in fintech entities of all sizes and stages.
- Inadequate representation may result in denial or annulment.
5. Task:
- Guide member conduct and ensure adherence to standards and laws.
- Create a code of conduct and industry standards.
- Develop standardized documentation for the FinTech sector.
6. Governance Standards:
- BOD and KMP with professional competence and integrity.
- Fit and follow proper norms.
- Guidelines for transparency, accountability, integrity and fairness.
- RBI may nominate supervisors on the SRO-FT Board.
7. Need for Industry Feedback:
- Comprehensive questions on the number of SROs required and their membership.
- Discussion on whether SRO-FT should include only unregulated members or a mix of regulated and unregulated.
- Consensus is important for effective self-regulation.
8. Feedback from Industry:
- Positive response from industry representatives acknowledging the comprehensive and collaborative approach of the SRO framework.
Important questions related to exam
- What is the primary objective of RBI's draft framework for Fintech Self-Regulatory Organizations (SRO-FTs)?
- What are the features an SRO-FT should have as per RBI?
- What are the general requirements proposed by RBI for SRO-FT?
- What criteria must SRO-FTs meet in terms of membership representation?
- What are the functions required from SRO-FT as per the draft rules?
- What governance standards have been outlined for the Board of Directors (BOD) and Key Managerial Personnel (KMP) of an SRO-FT?
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