The Reserve Bank of India (RBI) has introduced a draft framework for Self-Regulatory Organisations (SROs) in the fintech sector. This initiative aims to enable the burgeoning fintech industry to innovate responsibly, even in the absence of stringent formal regulations.
What Happened? “The SRO for Fintech (SRO-FT) should be the linchpin in fostering responsible innovation, creating a supportive environment for regulated experimentation,” RBI stated, emphasizing the need for a balanced approach between innovation and regulatory frameworks.
This SRO-FT actively addresses grievances, conflicts of interest, and disputes among its members.
Despite the fintech industry’s struggle to form a united SRO, discussions about self-regulation began in early 2023 and gained momentum in October 2023, following an RBI press briefing. This is RBI’s second venture into establishing an SRO in the sector, following a similar attempt for payment systems in 2020. Although applications were submitted for the payments SRO, RBI’s approval is still pending.
What does the RBI want? The RBI envisages multiple SROs in the sector, each representing a broad spectrum of fintech activities like payments and lending. The SROs will particularly focus on managing unregulated entities, such as loan service platforms and third-party applications on the Unified Payments Interface (UPI), which currently falls outside direct regulatory oversight.
Get all the latest Share Market trends and news to set you up for the week ahead.
To qualify as an SRO, organizations must represent a diverse range of fintech startups and adopt a ‘development-centric’ approach, assisting early-stage startups to innovate within a regulated framework. While the RBI has not specified a net worth requirement, it mandates that the SRO be not-for-profit and capable of deploying technological solutions on time.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.