Framework Or Recognising Self-Regulatory Organisation For The FinTech Sector (SRO-FT) : RBI
The Reserve Bank of India (RBI) recently issued the Framework for Recognising Self-Regulatory Organisation for the FinTech Sector (SRO-FT) for better self-governance and compliance by firms in this space.
- The framework defines fintech as entities providing technological solutions for delivery of financial products and services to businesses and consumers or encompassing regulatory and supervisory compliance in partnership with traditional financial institutions or otherwise.
- The SRO-FT would be industry-led and will be responsible for establishing and enforcing regulatory standards, promoting ethical conduct, ensuring market integrity, resolving disputes and fostering transparency and accountability among its members.
- The applicant should be set up as a not-for-profit company, and its shareholding should be sufficiently diversified, with no entity holding 10% or more of its paid-up share capital, either singly or acting in concert.
- 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.
- Applicants should demonstrate the capability of establishing the necessary infrastructure to act as an SRO-FT effectively and consistently.
- 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.
- While the SRO can’t open branches or offices outside India, FinTechs domiciled outside India can become members of an SRO.
- The number of SRO-FTs to be recognised would depend on the number and nature of the applicants received, and the RBI reserves the right not to grant recognition to any such application.
- Reserve Bank of India (RBI) can nominate or depute observers on the SRO-FT’s board.
