RBI issues omnibus framework for recognising SROs for banks, NBFCs, fintechs
Self-regulatory organisations (SROs) of banks, non-banking financial companies and fintechs, among others, will need to keep the Reserve Bank regularly informed about developments in their respective segments and promptly inform it about any regulatory violations.
In the “Omnibus Framework for recognising SROs for Regulated Entities (REs) of RBI”, the central bank said SROs have to submit annual report to the Reserve Bank, within three months of completion of the accounting year.
The SRO, which will be structured as a not-for-profit company registered under Section 8 of the Companies Act, 2013, will also submit periodic/ ad hoc returns as may be prescribed by RBI.
The central bank noted that with the growth of the REs (banks, NBFCs, fintechs, etc) in terms of number as well as scale of operations, increase in adoption of innovative technologies and enhanced customer outreach, a need is felt to develop better industry standards for self-regulation.
SROs enhance the effectiveness of regulations by drawing upon the technical expertise of practitioners and also aid in framing/ fine-tuning regulatory policies by providing inputs on technical and practical aspects, nuances and trade-offs involved.
Periodic talks
RBI said SROs have to engage in periodic interactions with it. They are expected to look at the larger picture of the industry/ segment in offering its views/ inputs/ suggestions.
Reserve Bank may, if it deems necessary, inspect the books of the SRO or arrange to have the books inspected by an audit firm.
RBI emphasised that an applicant must be fit and proper for the grant of recognition as an SRO.
The applicant has to undertake to function as per the objectives and responsibilities prescribed under this framework.
“While granting recognition as an SRO, the Reserve Bank may, if deemed necessary, prescribe such other conditions as may be necessary to ensure that functioning of the SRO is not prejudicial to the public interest,” RBI said.
The central bank said it will revoke the recognition granted to an SRO, if it deems its functioning to be detrimental to public interest or any other stakeholder.