The scope for multiple SROs in fintech remains open, with every fintech entity required to be part of at least one such body
The Reserve Bank of India (RBI ) has released definitive guidelines for establishing a self-regulatory organisation (SRO) within the fintech sector. This move follows the release of draft guidelines earlier this year, with input from industry stakeholders.
The RBI accentuates the need for the SRO to be inclusive, representing various participants in fintech such as peer-to-peer lending services and account aggregators, excluding banks. When the company prioritises unregulated fintech entities under the SRO, the regulator allows regulated entities to join as members.
In its guidelines, the RBI highlights the importance of comprehensive membership agreements that cover a wide range of industry players. This approach aims to grant legitimacy and credibility to the SRO in formulating standards, and codes of conduct, and ensuring effective monitoring and enforcement.
The scope for multiple SROs in fintech remains open, with every Fintech entity required to be part of at least one such body. However, the RBI reserves the right to derecognize SROs with insufficient membership. The RBI authorise six key responsibilities for the SRO, including sector representation, data repository, adherence to developmental principles, dispute resolution, regulatory compliance, and independence.
The SRO is expected to establish strong systems for managing “user harm” instances like fraud, mis-selling, unfair practices, and unauthorized transactions. It will also monitor business practices, and exceptions, and build surveillance tools within the fintech sector. Moreover, the SRO will serve as a communication bridge between industry players and regulators, alongside setting up consumer grievance redressal channels.
According to the reports, Industry bodies like the Payments Council of India (PCI) and the Digital Lenders’ Association of India are preparing to apply for the SRO license. PCI Chairman Vishwas Patel expressed confidence in the shift towards self-governance, believing it will encourage members to stick to industry standards and best practices.
