What is SRO-FT?
An SRO-FT (Self-Regulatory Organization for Fintech) is an industry-led entity that sets and enforces regulatory standards, promotes ethical conduct, ensures market integrity, resolves disputes, and fosters transparency and accountability among its members. It operates under the oversight of the Reserve Bank of India (RBI) and aims to guide members through regulatory priorities, facilitate communication with the RBI, and support innovation and consumer protection.
Why is self-regulation considered best for fintechs?
Self-regulation is deemed beneficial for fintechs as it allows the industry to adapt quickly to fast-evolving market dynamics while maintaining high levels of internal governance and ethical standards. This method is conducive to an organized and orderly development of the sector, promoting responsible lending and borrowing by setting industry standards and ensuring ethical practices among its members.
How will the SRO-FT ensure that entities comply with the regulations?
An SRO-FT ensures compliance through various codes and standards for its members but also specifies the consequences for violations ranging from reasonable penalties to expulsion from the organization. This includes enforcing standards of conduct, industry benchmarks, advertising guidelines, governance standards, and data protection and statutory compliance measures.
What are the eligibility and membership criteria for an SRO-FT?
To be eligible for membership in an SRO-FT, an entity must be a non-profit organization registered under Section 8 of the Companies Act, 2013, with diversified shareholding where no single entity holds 10% or more of the share capital, either individually or in concert. The entity must represent the fintech sector and its activities as members, with membership being voluntary. It may include fintechs from outside the country and businesses peripheral in the financial sector not regulated by any existing financial regulator, though it may also include regulated entities.
What is the impact of SRO-FT on the industry?
The introduction of SRO-FT promises to accelerate access to financial services by creating a more trusted and stable environment for fintech operations. It addresses issues like unscrupulous digital lending practices by setting stringent industry standards and promoting ethical behavior. This regulation framework enhances the industry’s reputation and attracts more reliable investments, thereby aiding in the sector’s orderly growth and innovation.
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