After months of encouraging fintechs to self-regulate, the Reserve Bank of India (RBI) has finally come out with a draft framework for recognising self-regulatory organisations (SROs) in the fintech sector. It lays down the characteristics of a fintech self-regulatory organisation (SRO-FT), who can apply to be one, what are its functions and responsibilities, etc. "FinTechs are significantly reshaping the landscape of financial services by streamlining processes, improving accessibility, and reducing costs. Achieving a healthy balance between facilitating innovation by the industry on the one hand, and meeting regulatory priorities in a manner that protects consumers and contains risk, on the other, is crucial to optimising the contribution of the FinTech sector. Self-regulation within the FinTech sector is a preferred approach for achieving the desired balance." — RBI Press Release The draft framework, released on January 15, is open for public feedback until the end of February 2024 and interested stakeholders can email their responses. We don't believe self-regulation is the right approach for regulating fintech and we've explained our reasons here. Separately, the RBI in December 2023 released a draft framework for SROs for regulated entities such as banks and non-banking financial companies (NBFCs), which is also open for public feedback until January 25. Functions of a fintech SRO Setting standards and code of conduct: The SRO should frame a code of conduct for its members including a code of conduct for advertisements by its members. The SRO should set industry benchmarks and baseline standards for transparency, disclosure, data privacy,…
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