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  • Writer's pictureBhargesh Ojha

Final Guidelines on SRO-FT

The Reserve Bank of India (RBI) released the final framework titled 'Framework for Self-Regulatory Organisation(s) in the FinTech Sector' on 30 May 2024, building upon the draft framework proposed earlier. This follow up article aims to provide a comprehensive update on the advancements in SRO-FT, comparing it with the initial draft framework.


Key Changes and Enhancements:



  • Definition and Scope: The said framework specifies that FinTech entities eligible for SRO-FT membership are those that provide technological solutions for delivering financial products and services to businesses and consumers. These entities can work independently or in partnership with traditional financial institutions. The framework aims to ensure that all eligible FinTechs, regardless of their size or activities, are included. This approach promotes a clear and inclusive membership criterion, ensuring that a diverse range of FinTech entities can become members of the SRO-FT.

  • Regulatory Approach: While the initial draft highlighted the importance of adaptive regulatory frameworks, the final framework emphasizes a proactive and forward thinking approach. Given the dynamic nature of FinTech innovations and their potential impact on financial markets, this approach involves proactively setting guidelines and standards to manage risks associated with new technologies and business models. It emphasizes the importance of flexible regulation tailored to the dynamic nature of the FinTech sector, while addressing concerns related to customer protection, data privacy, and cyber security.

  • Role of Self-Regulation: Self-regulation could allow the fast-changing FinTech sector to set its own rules and standards for responsible innovation, without formal regulations. By working together, FinTech(s) can identify challenges, promote ethical practices, and align growth with self-imposed guidelines that adapt easily. Self-regulation encourages self-discipline and good governance for organized sector development. This framework outlines a structure run by the FinTech industry itself. The SRO would make and enforce standards, resolve disputes, and require transparency from its members.

  • Characteristics and Operations of SRO-FT: The SRO-FT should operate objectively and responsibly under RBI oversight, striving for sustainable FinTech development while truly representing the sector through comprehensive membership, including RBI-regulated FinTechs but excluding banks, fostering inclusivity and leveraging collective expertise to frame pragmatic standards and conduct codes accepted industry-wide; it should be development-oriented, prescribing eligibility criteria for members, providing guidance and training to build capacity, bridging skill gaps, and facilitating forward-looking policies; maintain independence from undue influence, impartiality, and avoid conflicts of interest; serve as a legitimate arbiter transparently resolving member disputes; encourage regulatory alignment by facilitating communication, advocating changes, promoting compliance culture while not substituting prescribed regulations, and taking disciplinary action; act as an information repository collecting, analyzing, disseminating relevant member data for research, trend analysis, and policymaking.

  • Eligibility Criteria: The applicant for an SRO-FT should be a not-for-profit company registered under Section 8 of the Companies Act, 2013, with no single entity holding 10% or more of the paid-up share capital, and the Memorandum of Association explicitly stating operation as an SRO-FT as the primary objective; it should have a minimum net worth of Rs. 2 crore within one year of RBI recognition or before commencing operations, whichever is earlier, demonstrate the capability to establish necessary infrastructure, including robust IT systems and the ability to deploy technological solutions in a timely manner, put systems in place to manage user harm instances like fraud, mis-selling, unfair practices or misconduct harming financial services consumers that come to notice or are referred by RBI or stakeholders, and not set up any overseas entities/offices without prior RBI approval.

  • Membership Criteria: FinTech(s) can apply to be recognized as an SRO-FT by showing their current and planned members. Members should mostly be FinTechs not regulated elsewhere, but some regulated non-bank firms can join too. How many SRO-FTs get approved depends on the applications received. Applicants must provide their constitution documents, board and management details, plan for wide membership, justification for being an SRO-FT, and explain their planned functions. Applications need board approval and must give any additional info RBI asks for. RBI can reject incomplete applications after hearing the applicant. Approved SRO-FTs get a recognition letter but must give true info, follow membership and other rules, and can get recognition revoked if RBI finds issues with their functioning or activities.

  • Functions and Responsibilities: Both the draft and final frameworks highlight the functions and responsibilities of SROs in several key areas. These include setting industry standards, which involves establishing guidelines that FinTech entities must follow to ensure consistency, quality, and reliability. They also encompass oversight, meaning the monitoring of FinTech activities to ensure compliance with these standards and regulatory requirements. Additionally, developmental activities are emphasized, referring to initiatives aimed at fostering innovation, providing support and resources for the growth and expansion of FinTech entities. Grievance redressal is another crucial function, which involves creating and maintaining a framework for addressing and resolving complaints and disputes within the FinTech sector. Lastly, collaboration with regulators is essential for aligning industry practices with legal frameworks.

  • Responsibilities towards RBI: The final framework underscores the importance of SRO-FT in facilitating transparent communication with RBI, relaying sector insights, updating on developments, and assisting in policy-making and compliance. It emphasizes the collaborative role of SRO-FT in advancing the regulatory objectives of RBI.

Conclusion: The release of the final framework for Self-Regulatory Organisation for the FinTech Sector (SRO-FT) marks a significant milestone in India's FinTech landscape. With detailed guidelines, eligibility criteria, and enhanced expectations, the framework aims to foster a culture of responsible conduct, innovation, and compliance within the FinTech sector. As stakeholders navigate the evolving regulatory landscape, collaboration between industry players, regulatory bodies, and SROs will be essential to ensure the continued growth and stability of India's FinTech ecosystem.

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