RBI Issues Framework for Self-Regulatory Organisations in Fintech Sector

The Reserve Bank of India (RBI) has released the final framework for Self-Regulatory Organisations (SROs) in the fintech sector. This framework outlines the characteristics, membership eligibility, and responsibilities of SROs.

Experts in the fintech industry have welcomed this move, believing that the SRO framework will ensure the sustainability and credibility of the sector. It will also promote high standards of conduct, transparency, and accountability. However, experts also caution that this framework might increase costs for fintech companies due to additional compliance requirements. Despite this, they agree that it will build trust with consumers and regulators. The FinTech Convergence Council highlighted that the new framework acknowledges the rapid growth and innovation in the fintech landscape. It strikes a balance between fostering development and ensuring consumer protection.

Harshvardhan Lunia, Chair of the FinTech Convergence Council and CEO of Lendingkart, praised the RBI’s initiative. “This move will enhance our industry’s credibility and sustainability, while prioritizing customer protection, data privacy, and cybersecurity,” he said. The RBI noted the growing number and scale of fintech operations, the adoption of innovative technologies, and increased customer outreach. They felt the need to develop better industry standards for self-regulation.

RBI has called for the SROs to have a representative structure. This would allow them to draw on the collective expertise and experience of their members, creating standards that are practical, adaptive, and widely accepted in the fintech community.

Shilpa Mankar Ahluwalia, Partner and Head of Fintech at Shardul Amarchand Mangaldas & Co, explained that the SRO will link the industry and the regulator, balancing innovation and risk management. While SRO membership may add costs, it will build trust and benefit the fintech ecosystem in the long run.

Ashish Goyal, Co-Founder and CFO of Fibe, emphasized that an industry-led and representative SRO will better understand the ecosystem and leverage the collective expertise of its members.

The RBI had initially asked fintechs to establish an SRO in September last year and released a draft framework in January 2024, seeking feedback from stakeholders by February 2024.