Mumbai: The Reserve Bank of India (RBI) released a ‘draft framework for recognizing Self-Regulatory Organizations (SRO) for the FinTech Sector’ on Monday, outlining the characteristics of a FinTech SRO and including the required functions and governance standards.
FinTechs are significantly reshaping the landscape of financial services by streamlining processes, improving accessibility, and reducing costs. Achieving a healthy balance between facilitating innovation by the industry on the one hand, and meeting regulatory priorities in a manner that protects consumers and contains risk on the other, is crucial to optimizing the contribution of the FinTech sector, the RBI said.
“Self-regulation within the FinTech sector is a preferred approach for achieving the desired balance,” the central bank stated. According to the RBI draft framework, the SRO-FT would derive its strength from its membership, ensuring that it is truly representative of the FinTech sector. (Also Read: Sensex Jumps 759 Points To Close At Record High, Nifty Scales 22K Mount On Sharp Gain In It Shares)
Through comprehensive membership agreements that encompass a broad spectrum of industry players, the SRO-FT should gain the legitimacy and credibility to not only frame baseline standards and rules of conduct codes but also to effectively monitor and enforce them.
The SRO-FT must be looked up to and accepted by the industry as the key body for setting market standards, defining rules of conduct, and ensuring the voluntary adoption of the common framework by its members, the RBI said. (Also Read: India’s Wholesale Inflation Rises To 0.73% In December)
The framework also states that the SRO-FT should be development-oriented, actively contributing to the growth and evolution of the industry. This involves providing specialized knowledge and expertise, offering guidance, and contributing to capacity building through training programs, and prescribing minimum eligibility criteria for its members.