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Framework for Recognising Self-Regulatory Organisation for the FinTech Sector (SRO-FT)

Last Updated on 31st May, 2024
3 minutes, 32 seconds

Description

Framework for Recognising Self-Regulatory Organisation for the FinTech Sector (SRO-FT)

Disclaimer: Copyright infringement not intended.

Context

  • The Reserve Bank of India (RBI) has issued a framework aimed at enhancing self-governance and compliance within the FinTech sector.
  • The RBI envisages the SROs to promote a healthy balance between innovation and regulatory compliance in a manner that protects consumer interests.

Framework for Recognising Self-Regulatory Organisation for the FinTech Sector (SRO-FT)

Application Process

  • Entities meeting or intending to meet the eligibility conditions outlined in the SRO-FT framework are required to submit applications.
  • The RBI will review the applications and publish the names of eligible applicants for "recognition" on its website.

Objectives of SRO-FT

  • Objective Operation: The SRO-FT is expected to operate objectively, with credibility and responsibility under the oversight of the RBI.
  • Promoting Sector Development: It should strive towards promoting healthy and sustainable development within the FinTech sector.
  • Regulatory Compliance: The SRO-FT may identify a glide path towards phased regulatory and/or supervisory compliance if deemed necessary.

Eligibility Criteria for Applicants

  • Not-for-Profit Entity: The applicant should be set up as a not-for-profit company, ensuring its primary focus is on sector development rather than profit.
  • Diversified Shareholding: Shareholding should be sufficiently diversified, with no single entity holding 10% or more of the paid-up share capital

Function

Description

Standard Setting

  • Establish standards through a consultative process
  • Frame a code of conduct for members, including regulations on advertisements
  • Set industry benchmarks and baseline technology standards
  • Develop standardized contracts/documents for members
  • Create baseline governance standards

Oversight and Enforcement

  • Develop structured frameworks for oversight and enforcement functions
  • Implement surveillance mechanisms to monitor non-compliance
  • Provide counselling on restrictive, unhealthy, and detrimental practices

Developmental

  • Promote understanding of regulatory requirements through knowledge transfer and training programs for members
  • Encourage a culture of research and development (R&D) and innovation

Grievance Redress

  • Establish grievance redress and dispute resolution frameworks for members
  • Ensure efficiency, fairness, and transparency in grievance redress processes
  • Work towards consumer awareness on products and services

Reporting Obligations

  • Furnish information/consultation to the RBI as required
  • Consult the RBI in developing and updating the taxonomy for fintechs
  • Submit an annual report to the RBI on activities or periodic returns as prescribed

Conclusion

  • The issuance of the SRO-FT framework by the RBI signifies a proactive approach towards enhancing governance and compliance within the FinTech sector.
  • By encouraging self-regulation through a structured framework, the RBI aims to foster a conducive environment for the sustainable growth of FinTech firms while ensuring regulatory oversight and compliance.

PRACTICE QUESTION

Q. Examine methods to enhance self-governance and compliance in FinTech. Address challenges in regulating innovation while upholding ethical standards. Recommend strategies for balancing innovation with regulatory oversight.

SOURCE: Business-Standard

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