Self-regulatory organization for Fintech in India

Self-regulatory organization for Fintech in India

News: Recently, RBI Governor Shaktikanta Das urged that fintech firms to create a Self-Regulatory Organisation (SRO) for transparent, fair, and consumer-centric practices.

What are SROs?
• An SRO is a non-governmental organization that sets and enforces rules and standards relating to the conduct of entities in the industry (members) with the aim of protecting the customer and promoting ethics, equality, and professionalism. SROs typically collaborate with all stakeholders in framing rules and regulations.

What is the role of SRO?
• The recognized SRO will serve as a two-way communication channel between its members and the RBI.
• It will work towards establishing minimum benchmarks, and standards and help instill professional and healthy market behavior among its members.
• SROs will impart training to the staff of its members and others and will conduct awareness programs.
• It will establish a uniform grievance redressal and dispute management framework across its members.

What are RBI’s expectation from Fintech sector?
• To engage in Industry’s best practices and compliance
• Set standards to prevent mis-selling and ensure ethical business practices
• Maintain transparency in pricing

How can an entity become a SRO?
• Those entities who are interested in being recognized as SROs will have to apply to the RBI.
• Once the regulator finds an entity suitable, it will issue a letter of recognition.

What is the importance of Fintech sector?
• Financial Inclusion - Through digital platforms and mobile apps, fintech companies have made it easier for people to access banking, payments, lending, and investment services.
• Efficiency and Cost Reduction in services as they make good use of technology – AI, ML, blockchain etc
• Improved customer satisfaction and experience
• Innovation and Disruption - Fintech companies are known for their innovative approaches to financial services.
• Customized service experience for customers which is data driven
• Innovative payment solutions – Digital wallets, peer to peer payment platforms, cryptocurrency.

What is RBI’s role in Fintech administration?
• Regulatory Oversight: RBI is the central regulatory authority for the financial sector in India.
• Licensing and Authorization - RBI is responsible for granting licenses and authorizations to fintech companies.
• RBI establishes industry standards and guidelines to ensure the safety, security, and efficiency of fintech operations.
• Monitoring and supervision
• Customer Protection and encourages innovation in the sector