Recently, the Self-Regulatory Organisations (SROs) have gained a lot of attention after Shaktikanta Das, the Governor of the Reserve Bank of India (RBI) urged the fintech companies to form the same over the next year. What is SRO and how will it impact the fintech sector? Here is all you need to know.
What is SRO
Self-Regulatory Organisations (SROs) are entities or associations within a specific industry or sector that establish and enforce rules and regulations to govern the behavior and practices of their members. These organisations are typically formed and managed by the industry itself, with the aim of promoting ethical conduct, maintaining industry standards, and ensuring compliance with applicable laws and regulations.
RBI Governor and SRO
The Governor of the central bank mentioned the SRO for the first time at the Global Fintech Fest (GFF 2023). Urging fintech players to form a self-regulatory organisation over the next year, he said, “I would like to use this opportunity to urge and encourage the fintechs to establish a Self-Regulatory Organisation themselves,” as quoted by Money Control.
And now on Friday, October 6, the governor announced a framework for the recognition of SROs for regulated entities of the RBI. The announcement was made while informing the outcomes of the Monetary Policy Meeting held between October 4 to October 6.
Citing the reason behind the framework, Das said, “Self-Regulatory Organisations (SROs) can play an important role in strengthening compliance culture among their members and also provide a consultative platform with the Reserve Bank for policy making. Therefore, it has been decided to issue a draft omnibus framework for recognising SROs for various categories of Regulated Entities (REs) of the Reserve Bank for stakeholder comments.”
He further added that additional sector specific conditions may also be prescribed at the time of calling for applications.
Impact of SROs on Fintech Companies
SROs can have a favourable impact on the fintech companies as it can help in establishing codes of conduct for its members which will foster transparency, fair competition, and consumer protection. The RBI Governor said at the GFF 2023 that SRO will provide a platform to fintech firms to enable them voice their requirements while alleviating the RBI from handling the entirety of regulatory responsibilities.
Creating a own set of rules can make sure that the fintech firms behave ethically, protect them against big problems, and help them compete better globally. It can also help fintech companies to adjust to changes and gain trust.
As regulators continue to contemplate, implement, and refine regulations for the orderly development of the fintech sector, SROs could play a pivotal role in the fintech industry by promoting responsible practices and maintaining ethical standards, RBI Deputy Governor T Rabi Sankar said, according to a report by Indian Express.