RBI On An Overdrive To Set Up Fintech Self-Regulatory Body

The Reserve Bank of India is actively working on building the first self-regulatory organisation for the Indian fintech industry. An announcement from the regulator is expected in the next few weeks, according to two persons in the know.

Currently, the Payments Council of India is working with the regulator to licence the SRO for Regulated Entities Ltd., the first of the two person quoted above told BQ Prime on condition of anonymity. The SRO RE will work on forming industry-level guidelines for payments and lending fintechs in India.

While the PCI has members across payment fintechs, the Fintech Convergence Council, formed in 2017, focuses on lending, insurance, investment, and agritech. The executive committee of the Fintech Convergence Council is chaired by Naveen Surya, chairman emeritus, PCI.

Another industry association, the Fintech Association for Consumer Empowerment, announced a new code of conduct last week. The code of conduct is based on seven core principles, FACE said in a statement.

"Code is a practical live-in document, demonstrating the members’ commitment to prioritising and safeguarding customer interests, prosperity, and well-being. The code reflects the rights and standards customers are entitled to as guarantees that FACE members voluntarily commit to," the statement said.

FACE had applied to the RBI to become an SRO last January and is awaiting approval.

The RBI has been actively conducting industry-level talks over the last few weeks, according to the two persons mentioned above. The conversations have focused on the role of the SRO in controlling anti-consumer practises, the formation of monopolies, and higher governance standards.

The SRO may have some limited punitive powers to control any offenders in the system, the first person said.

Currently, the Microfinance Institutions Network and Sa-Dhan act as SROs for the microfinance industry. Some of the other financial sector SROs in the country include the Association of Mutual Funds in India, the Association of Merchant Bankers of India, etc.

At the Global Fintech Fest held earlier this month, RBI Governor Shaktikanta Das encouraged the fintech industry to set up an SRO to reduce the regulatory burden on the central bank.

Fintechs "need to evolve industry best practises, privacy, and data protection norms in sync with the laws of the land, set standards to avoid mis-selling, promote ethical business practises, have transparency in pricing, etc.", Das had said in a speech.