The Digital Lenders Association of India is planning to introduce within a month a new code of conduct, which will be adopted as a framework for its proposed self-regulatory organisation.
The code will be applicable to over 80 fintech members of the industrial body, CEO Jatinder Handoo told FE.
Among the new measures taken by the Digital Lenders Association of India (DLAI) is a grievance redressal cell with a three-tier structure for the filing of complaints by customers.
A two-tier structure will be put in place for the investigation of complaints. In case a fintech is unhappy with a decision taken against the company, it can escalate the matter to a higher appellate panel, the members of which will change periodically.
The new model of conduct will entail apprising the Reserve Bank of India (RBI) of granular data on a regular basis and every quarter it will inform the central bank on penal advisories that they have sent out to members, Handoo said.
The RBI has been prodding the fintech industry to form a self-regulatory body for some time. “We expect the sector itself, the regulated entities themselves, to take certain ownership and decide certain micro aspects of going about their business. There are certain things which we prescribe on a regulatory level, at the macro level. At the micro level, we would like the SROs to play a more proactive role,” RBI Governor Das had said in April.
The challenge
While the Digital Lenders Association of India is planning to come up with a new code of conduct, it remains to be seen whether the RBI recognises the proposed self-regulatory organisation (SRO).
Multiple challenges such as building a consensus on a common framework, various business models of fintechs and the fear of disclosing customer data to peer companies led to a delay in the formation of an SRO.
Nirav Choksi, co-founder and CEO of Credable, says, “Fintechs are finding it challenging to arrive at a consensus on the framework of the SRO. As a result, we have seen very little progress on this front.”
“For an industry as diverse and fast-growing as Fintech, bringing the players together under a unified framework will be quite a difficult task,” he said, adding that due to the heightened competition among these players, they may have reservations about disclosing data that is required under the governance of an SRO.
Amit Das, co-founder and CEO of Think360.AI, said fintechs as a group lack a finite coherent definition. The fintech industry includes both regulated and unregulated players.
As far as the regulator is concerned, he said it is looking for an SRO which is balancing conflicting priorities of various stakeholders, has an independent governing body, whose key individuals “hopefully” command industry, and is able to balance growth with ethics and consumer interest.
“Fintechs have to act beyond their inherent instinct of seeking growth at all costs while forming and supporting an SRO,” he said.