The Reserve Bank of India (RBI) on Thursday issued a draft omnibus framework for self-regulatory organisations (SROs) for banks, NBFCs and other entities regulated by it. The RBI has sought feedback on the same by January 25, 2024.
In order to be eligible to apply for an SRO license, the applicant shall set up a not-for-profit company with adequate net worth and the ability to create infrastructure to discharge various responsibilities on a continuing basis. The applicant must also represent the sector and have the specified membership, or should at least submit the road map for attaining specified membership within a reasonable timeline.
“Neither the applicant nor any of its directors should be involved in any legal proceeding, which may have an adverse impact on the interest of the sector. Further, neither the applicant nor any of its directors should have been convicted of any offence, including moral turpitude/economic offence, in the past,” the RBI said, adding that applicant must meet fit and proper criteria in all other respects.
RBI governor Shaktikanta Das in September suggested that fintech firms should form an industry SRO. In June, FE had reported that the Digital Lenders Association of India (DLAI) is planning to introduce a new code of conduct, which will be adopted as a framework for its proposed SRO, within a month. The code will be applicable to over 80 fintech members of the industrial body, CEO Jatinder Handoo had said. A separate SRO application by another fintech lobby group, Fintech Association for Consumer Empowerment (FACE), was filed as early as January 2022.
The RBI’s draft framework said that the SRO should be professionally managed and have suitable provision in their Articles of Association (AoA) to ensure the same. The directors of SRO shall fulfil the ‘fit and proper’ criteria as framed by the SRO board on an ongoing basis and at least one-third of members in the board of directors, including the chairperson, shall be independent and without any active association with the category of REs for which the SRO is established.
Further, any change in the directorship or any adverse information about any director shall be immediately reported to the RBI. The RBI shall revoke the recognition granted to the SRO, if it deems that the functioning of the SRO is detrimental to public interest. SRO shall also keep the RBI regularly informed of the developments in their respective sector and shall “promptly” inform the regulator about any violation by its members. The SRO shall carry out any work assigned to it by the RBI and examine the proposal or suggestion referred to it. It shall also provide data, information, sought by the central bank, periodically or as advised.