Mumbai: The Reserve Bank on Thursday came out with the final framework for setting up self-regulatory organizations (SROs) in the fintech industry.
The rules state that SRO-FTs (fintechs) will operate “with impartiality, credibility and responsibility” under the supervision of the central bank and work towards “healthy and sustainable development” of the sector.
The Framework defines FinTechs as entities providing technological solutions for the delivery of financial products and services to businesses and consumers, including regulatory and supervisory compliance, in partnership with traditional financial institutions or otherwise.
Recognizing that the fintech sector is innovating, the framework clarifies RBI's concerns with the sector, stating that the sector's concerns are "customer security, data privacy, cyber security, complaint management, international governance". , which arise from "financial system integrity".
“Therefore, the approach to regulation of this dynamic sector needs to be balanced, nuanced and appropriately anticipated.In such a context, the framework for fintech must also be imaginative, adaptive, flexible and proportionate to the perceived risks,” he said.
The RBI said self-regulation within the sector could be a way to achieve a "delicate balance" between maximizing creative potential and minimizing sector risks.
The framework states that self-regulation can enable the FinTech sector to grow with self-imposed standards, be accountable to peer demands and be guided by exemplary conduct norms and mark eligibility for such SROs. Specifications have been listed.
An SRO should be truly representative of the sector and should not include banks.RBI said it should focus on being growth oriented and should be independent from any influence.
All members of the SRO must perceive the forum as a legitimate arbitrator of disputes, and the body must be able to align members with regulatory priorities. No single entity should hold more than 10 per cent stake in an SRO. The entity wishing to apply for SRO must have a minimum net worth of Rs 2 crore within one year of recognition.
The SRO must be registered in India but can have foreign fintechs as its members, the norms said, adding that membership of the body should be voluntary.RBI will decide on the fit and proper status of the SRO-FT, its Board and key management personnel. Its functions and responsibilities include monitoring standards setting, enforcement and developmental activities for the sector.
The central bank has also listed the responsibilities to be performed by SRO-FTs towards RBI, and underlined that they should also have sound governance practices.
The framework states that RBI may nominate or appoint observers to the Board of SRO-FTs, if considered necessary.
The rules state that SRO-FTs (fintechs) will operate “with impartiality, credibility and responsibility” under the supervision of the central bank and work towards “healthy and sustainable development” of the sector.
The Framework defines FinTechs as entities providing technological solutions for the delivery of financial products and services to businesses and consumers, including regulatory and supervisory compliance, in partnership with traditional financial institutions or otherwise.
Recognizing that the fintech sector is innovating, the framework clarifies RBI's concerns with the sector, stating that the sector's concerns are "customer security, data privacy, cyber security, complaint management, international governance". , which arise from "financial system integrity".
“Therefore, the approach to regulation of this dynamic sector needs to be balanced, nuanced and appropriately anticipated.In such a context, the framework for fintech must also be imaginative, adaptive, flexible and proportionate to the perceived risks,” he said.
The RBI said self-regulation within the sector could be a way to achieve a "delicate balance" between maximizing creative potential and minimizing sector risks.
The framework states that self-regulation can enable the FinTech sector to grow with self-imposed standards, be accountable to peer demands and be guided by exemplary conduct norms and mark eligibility for such SROs. Specifications have been listed.
An SRO should be truly representative of the sector and should not include banks.RBI said it should focus on being growth oriented and should be independent from any influence.
All members of the SRO must perceive the forum as a legitimate arbitrator of disputes, and the body must be able to align members with regulatory priorities. No single entity should hold more than 10 per cent stake in an SRO. The entity wishing to apply for SRO must have a minimum net worth of Rs 2 crore within one year of recognition.
The SRO must be registered in India but can have foreign fintechs as its members, the norms said, adding that membership of the body should be voluntary.RBI will decide on the fit and proper status of the SRO-FT, its Board and key management personnel. Its functions and responsibilities include monitoring standards setting, enforcement and developmental activities for the sector.
The central bank has also listed the responsibilities to be performed by SRO-FTs towards RBI, and underlined that they should also have sound governance practices.
The framework states that RBI may nominate or appoint observers to the Board of SRO-FTs, if considered necessary.
