India’s central bank drafts framework for fintech self regulatory organizations

India’s Central Bank, the Reserve Bank of India (RBI), has released a preliminary framework for self-regulatory organizations (SRO) specifically targeting the fintech industry. The primary objective of these guidelines is to enable the emerging sector to operate and drive innovation responsibly in the absence of formal regulatory frameworks.

According to the RBI, the primary responsibility of the body will be to foster innovation by establishing a framework that promotes responsible experimentation, thereby striking a balance between innovation and regulatory compliance. SRO will also have a significant role in overseeing unregulated entities that operate in the fintech industry. This includes managing loan service platforms, third-party applications on the Unified Payments Interface, and other entities not currently under regulatory oversight.

Furthermore, while multiple SROs are allowed to be established in the sector, it is important for each SRO’s members to have sufficient representation in areas such as payments and lending. The RBI also requires the organization to be ‘not-for-profit’, have the ability to implement technological solutions promptly, and meet specified independence criteria for its board members.