An SRO-FT (Self-Regulatory Organization for Fintech) is an industry-driven entity dedicated to establishing and enforcing regulatory standards. It promotes ethical conduct, ensures market integrity, resolves disputes, and fosters transparency and accountability among its members. Operating under the supervision of the Reserve Bank of India (RBI), the SRO-FT aims to guide its members through regulatory priorities, facilitate communication with the RBI, and support innovation and consumer protection.
Self-regulation is recognized as advantageous for fintechs because it enables the industry to swiftly adapt to rapidly changing market dynamics while upholding high standards of internal governance and ethics. This approach is conducive to an organized and orderly development of the sector, promoting responsible lending and borrowing by establishing industry standards and ensuring ethical practices among its members.
The SRO-FT ensures compliance through a set of codes and standards for its members, clearly specifying the consequences for violations. These range from reasonable penalties to expulsion from the organization. This includes enforcing standards of conduct, establishing industry benchmarks, setting advertising guidelines, and ensuring governance standards as well as data protection and statutory compliance measures.
To qualify for membership in an SRO-FT, an entity must be a non-profit organization registered under Section 8 of the Companies Act, 2013. It must have diversified shareholding, with no single entity owning 10% or more of the share capital, either individually or in concert. The entity should represent the fintech sector and its activities as members, with membership being voluntary. This may include fintechs from abroad and businesses ancillary to the financial sector that are not regulated by any existing financial regulator, although it may also encompass regulated entities.
The establishment of SRO-FT is set to enhance access to financial services by fostering a more trusted and stable environment for fintech operations. It addresses challenges such as unethical digital lending practices by implementing stringent industry standards and promoting ethical behavior. This regulatory framework not only enhances the industry's reputation but also attracts more reliable investments, thereby facilitating orderly growth and innovation in the sector.
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