RBI unveils final guidelines for fintech SRO; PCI wants to apply
May 30, 2024
Synopsis
The RBI had unveiled draft guidelines in January this year, following which industry participants sent in their responses. The regulator wants the SRO to be truly representative of multiple participants across the fintech space.
The Reserve Bank of India on Thursday released the final guidelines for setting up a self-regulatory organisation (SRO) for the fintech sector.
The central bank had released draft guidelines in January this year, following which industry participants had sent in their responses.
The regulator wants the SRO to be truly representative of multiple participants across the fintech space from peer-to-peer lending to account aggregators, except banks.
“Through comprehensive membership agreements that encompass a broad spectrum of industry players, the SRO-FT should gain the legitimacy and credibility to not only frame baseline standards and rules of conduct codes, but also effectively monitor and enforce them,” the regulator wrote in its guidelines.
However, the RBI has also kept the scope for having multiple SROs in the fintech sector open, while mandating that every fintech should be part of at least one such body. Membership of any SRO will be voluntary. If it cannot gather momentum in terms of getting sufficient members, the regulator might de-recognise the body.
Given the diversity in the fintech ecosystem, the challenge for the industry has been to bring all its participants together under the umbrella of a single SRO. Now, with the RBI’s go-ahead for multiple such bodies, that problem seems to have been solved.
The central bank has put out six major mandates for the body: it needs to be truly representative of the sector, be a repository of data, stick to developmental principles, be an arbiter of disputes, encourage members to adhere to regulatory principles, and be independent of influence.
The regulator wants the SRO to put in place systems which can manage instances of ‘user harm’ like fraud attacks, misselling, unfair practices and unauthorised transactions.
Overall, the RBI wants the SRO to keep track of business practices of these fintechs and monitor any exceptions undertaken by certain companies. It also needs to build tools for surveillance of the fintechs operating within the sector. Besides being the communication channel between the industry and the regulator, the SRO needs to set up grievance redressal channels for consumers.
Meanwhile, the Payments Council of India (PCI), which is an industry body for payment companies and counts all the major payment entities as its members, wants to apply for this licence.
Responding to ET’s queries, PCI chairman Vishwas Patel said: “PCI shall apply for the SRO under a new non-profit entity as envisaged by RBI as we strongly believe that by pivoting towards a culture of self-governance, all our members will proactively set and adhere to industry standards and best practices.”
Other industry bodies like the Digital Lenders’ Association of India and Fintech Association for Consumer Empowerment could apply for the licence too.
[The Economic Times]
