Context: The Reserve Bank of India (RBI) released the final framework for recognising self-regulatory organisations in the financial technology sector (SRO-FT), encouraging entities to have a representative membership from the fintech sector.

 About SRO-FT

SRO-FTs can have membership of fintechs currently regulated by RBI, including non-banking financial companies-account aggregators (NBFC-AA), NBFC-peer-to-peer (P2P) lending platforms, among others, excluding banks.

Important Points

About SRO-FT Framework:

• The framework defines FinTechs as entities that provide technological solutions for the delivery of financial products and services to businesses and consumers.
• The SRO-FT will be responsible for setting and enforcing regulatory standards, promoting ethical conduct, ensuring market integrity, resolving disputes and promoting transparency and accountability among its members.
• The framework specifies that the applicant's shareholding should be adequately diversified. An applicant will not be eligible if any entity, singly or jointly, holds 10% or more of the paid-up share capital of the applicant.
• Applicants will need to have a minimum net worth of ₹2 crore within one year after recognition as an SRO-FT or before commencement of operations, whichever is earlier.
• At least one-third of members on the board, including the chairperson, should be independent and without any active association with a fintech entity.
• Further, the majority of non-independent directors are to be representatives of FinTechs that are currently not directly regulated.
• It will also need to put in place systems for managing ‘user harm’ instances, which may include fraud, mis-selling, unfair practices, unauthorised transactions, or any other form of misconduct.
• Although SRO cannot open branches or offices outside India, Fintech companies located outside India can become members of SRO.
• The number of SRO-FTs to be recognised will depend on the number and nature of applications received, and RBI reserves the right to not recognise any application.
• If deemed necessary, Reserve Bank of India (RBI) can nominate or depute observers on the SRO-FT's board.

Responsibilities:

• An SRO-FT should operate objectively under the oversight of RBI, and strive towards healthy and sustainable development of the sector.
• A fintech SRO should frame a code of conduct for members, set industry benchmarks and baseline technology standards for transparency, disclosure and data privacy, set standardised documents for specific requirements, set up a mechanism for accreditation in the fintech ecosystem, and a code of conduct for responsible advertisements and market standards.
• The SRO-FT should have adequate powers to investigate and take disciplinary action against its members for non-adherence to codes/standards/rules.
• Responsibilities towards RBI would include relaying sector-specific insights, addressing regulatory concerns, collaborate on the development of the sector, fostering co-operation, providing policy commensurate to the dynamic nature of the sector, acting as the collective voice of its members, providing regular updates on sector developments and collect and share relevant data.

Important fact for exam

RBI

• Founded: 1935
• Headquarters: Mumbai, India
• Governor: Shaktikanta Das