The Reserve Bank of India (RBI) on Thursday released its final guidelines for fintech companies to set up a self-regulatory organisation (SRO) to enforce regulatory norms and promote transparency in the sector.
According to the guidelines, OARs must be development-oriented, be genuine representatives and be legitimate arbiters of disputes.
An OAR for fintechs (OAR-FT), an industry“The entity headed by the outgoing president, Mr. Abdullah Abdullah, “should acquire the necessary legitimacy and credibility not only to set basic standards and codes of conduct, but also to monitor and enforce them effectively,” the central bank said.
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RBI Governor Shaktikanta Das had said in September last year that fintechs should set up a self-regulatory body to address their needs and challenges. The central bank had issued draft guidelines in January this year, following which industry bodies had sent their comments.
“The SRO-FT shall operate objectively, with credibility and accountability, under the supervision of the RBI. It shall endeavour to foster healthy and sustainable development of the fintech sector and, where necessary, identify a path towards progressive regulatory and/or supervisory compliance,” the RBI said.
The guidelines add that the SRO-FT should draw strength from its members, ensuring that it is truly representative of the fintech sector, including fintechs currently regulated by the RBI, and is development-oriented, actively contributing to the growth and evolution of the sector.
To maintain its credibility, the OAR-FT must operate independently, free from the influence of any one member or group of members, which would ensure informed decision-making and prevent the organization from being influenced by the interests of a dominant minority. Members must perceive the OAR-FT as a legitimate arbiter of disputes and be able to motivate its members to align with regulatory priorities.
The entity’s shareholding must be sufficiently diversified and no entity must hold 10% or more of its paid-up share capital, alone or acting in concert, according to the final standards.
Industry bodies have welcomed the new guidelines. “The RBI’s much-awaited SRO-FT guidelines are commendable in many ways: they recognise the multiple fintech streams and activities, such as digital lenders, account aggregators and P2P activities, which form a significant part of India’s fintech services; they give importance to unregulated entities that are often considered the backbone of the sector,” said Jatinder Handoo, CEO, Digital Lenders Association of India. India“The guidelines aim to equip the SRO-FT with capabilities to support new products and services,” he added.
The Payments Council of India (PCI) has announced that it will apply for membership in the SRO. “PCI will apply for membership in the SRO as a new not-for-profit entity, as envisaged by the RBI, as we are confident that by moving towards a culture of self-governance, all our members will proactively define and adhere to industry standards and best practices,” said Vishwas Patel, Joint Managing Director, Infibeam Avenuesand PCI President. “This approach could allow us all to demonstrate our commitment to responsible conduct and innovation, even in cases where there is no formal regulation,” he added.