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RBI unveils draft framework for FinTech self-regulatory body; experts react

By Puja Sharma

January 17, 2024

  • Financial Regulations
  • Fintech Innovation
  • Fintech news

RBIThe Reserve Bank of India (RBI) has issued a draft framework for self-regulatory organisations focused on FinTech. The main idea behind the guidelines is to empower the fledgling sector to function and innovate responsibly, even without formal regulations.

The RBI emphasised the importance of striking a delicate equilibrium between fostering industry innovation and addressing regulatory priorities to safeguard consumers and manage risks. This balance is essential for maximising the FinTech sector’s positive contributions.

In line with the development, FinTech experts share their insights on how this regulation will facilitate innovation in the space,

Ankit Ratan, Co-founder & CEO at Signzy, said, “We applaud the RBI for inviting applications to establish a self-regulatory organisation for FinTech firms (SRO-FR). By entrusting the FinTech industry with decision-making, the regulator has shown confidence in the entire ecosystem. We believe the SRO will provide a bridge to promote responsible innovation while adhering to all the regulations. This will be a crucial step in protecting customer interest and mitigating risk for the overall industry, which will enhance digital trust in the ecosystem. Operating under the oversight and guidance of the RBI, the FinTech sector is expected to witness an elevation in regulatory compliance standards.”

Over the years, FinTechs have transformed financial services through innovation solutions catering to customers’ individual needs. Ashish Goyal, Co-founder & CFO of Fibe, said, “Our country is one of the fastest growing FinTech markets in the world, and the development of an SRO will further build a resilient ecosystem and strengthen the sector’s competitiveness at a global stage. FinTech SRO will act as a unified voice of the industry and work towards putting forward collective concerns and addressing challenges. Forming an SRO will open up possibilities for greater collaboration among industry stakeholders and the regulatory body, leading to a more transparent and secure consumer ecosystem.

Given the dynamic nature of the FinTech industry, the formation of an SRO and adherence to industry standards will not only lead to responsible innovation but also safeguard the interest of consumers.

Gurjodhpal Singh, CEO of Tide India: “We welcome the draft framework introduced by the Reserve Bank of India (RBI) regarding the establishment of Self-Regulatory Organizations (SROs) in the FinTech sector. This move demonstrates the regulatory foresight of the RBI in addressing the unique challenges and opportunities within India’s burgeoning FinTech ecosystem.”

Singh added, “At Tide, we firmly believe in a compliance-first approach globally and support initiatives that foster innovation in the best interests of both business and society. The SRO framework has the potential to create an environment conducive to innovation and growth. It also has the potential to streamline reporting requirements and offer centralised guidance on regulations, thus providing clarity & transparency to the FinTech ecosystem. This, in turn, allows organisations like us to allocate resources more efficiently to core business activities and innovation.”

“We welcome the recent move by the Reserve Bank of India (RBI) to encourage the establishment of Self-Regulatory Organizations (SROs) for the FinTech ecosystem. This strategic initiative demonstrates the regulatory foresight of the RBI, promising positive implications for innovative players in the financial technology sector.” Sundeep Mohindru, Promoter and Director, M1xchange

Mohindru noted, “As a TReDS (Trade Receivables Discounting System) player, we are aware of the SRO framework’s impact on our operations and the broader industry. This move will foster a collaborative and efficient regulatory environment in the dynamic digital lending landscape.

We foresee several potential benefits. Firstly, by shouldering certain aspects of governance, SROs can alleviate regulatory burdens, creating a conducive environment for growth and innovation. This, in turn, allows us to focus on delivering innovative solutions and services to our clients, contributing to developing a sustainable financial ecosystem.”

The SRO framework provides an effective platform for expressing industry opinions and requirements. This collaborative approach and industry-wide participation ensures a more comprehensive understanding of the sector’s needs. This also facilitates the creation of regulations that are both fair and supports responsible growth.

As the SRO framework evolves, it accelerates the TReDS sector toward heightened professionalism, compliance, and ethical conduct. The emphasis on innovation, transparency, fair competition, and consumer protection aligns seamlessly with the core principles of FinTech startups.

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