The Reserve Bank of India (RBI) has released draft norms suggesting that Fintech Self-Regulatory Organisations (SROs) should operate independently and be development-oriented. These proposed guidelines aim to bring more credibility, responsibility, and progress to the fintech sector.

Objective and Credible SROs

According to the draft norms, the SROs for the fintech sector should be independent entities, free from any influence, and act as legitimate arbiters of disputes. They should also operate objectively, with credibility and responsibility under the supervision of the regulator. By maintaining objectivity and credibility, these SROs can effectively represent the fintech sector and encourage adherence to regulatory priorities.

Encouraging Membership and Regulatory Compliance

The draft norms further emphasize that SROs should be true representatives of the fintech sector. They should encourage all entities, regardless of size, stage, or activities, to become members and actively participate in regulatory compliance. By fostering membership across the sector, SROs can ensure a comprehensive representation of fintech companies and promote a unified approach towards regulatory priorities.

Establishing Eligibility and Infrastructure

To ensure the effectiveness of SROs, the draft norms state that applicants should meet certain eligibility criteria. They should be set up as not-for-profit companies and have sufficient net worth. Additionally, the applicant should demonstrate the capability to establish the necessary infrastructure to fulfill the responsibilities of the Fintech Self Regulatory Organisation (SRO-FT) effectively and consistently.

Managing User Harm Instances

The proposed norms also highlight the importance of managing instances of "user harm" that come to the SRO-FT's notice or are referred to them by the Reserve Bank or other stakeholders. The SRO-FT should establish appropriate systems for grievance redressal and dispute resolution. Furthermore, the draft norms explicitly state that SRO-FTs should not establish entities or offices overseas without prior approval from the Reserve Bank.

Public Feedback and Stakeholder Involvement

The RBI has invited comments and feedback on the draft framework from stakeholders and the public. This inclusive approach ensures that the norms reflect the needs and concerns of all relevant parties. The feedback received will help refine the final guidelines, making them more comprehensive and effective.

Towards Progressive Fintech Regulation

The push for the establishment of self-regulatory organizations in the fintech sector began in September 2023 when RBI Governor Shaktikanta Das urged fintech companies to establish SROs. The RBI's intention is to create a phased approach, emphasizing the importance of self-regulation before considering formal fintech regulations. The introduction of independent and development-oriented SROs aligns with this approach, promoting responsible growth and innovation in the fintech industry.

The RBI's draft norms for Fintech SROs emphasize the need for independence, development orientation, and regulatory compliance. By establishing SROs that operate objectively and represent the sector effectively, the RBI aims to foster a transparent and responsible fintech ecosystem. The proposed guidelines provide a framework for SROs to become credible entities, ensuring the protection of user interests and promoting regulatory priorities. With public feedback and stakeholder involvement, these norms can evolve into robust regulations that support the growth and development of the fintech industry in India.