SELF
REGULATORY ORGANISATION - ECONOMY
News:
Why the RBI has proposed
setting-up a Self-Regulatory Organisation for fintechs
What's
in the news?
●
Reserve Bank of India (RBI) Governor
Shaktikanta Das has asked fintech entities to form a Self-Regulatory Organisation
(SRO).
Self-Regulatory
Organisation (SRO):
●
An SRO can help in establishing codes of conduct for its members that foster
transparency, fair competition, and consumer protection.
●
It can act as a watchdog and encourage members to adopt responsible and ethical
practices.
●
It can provide a link between the
regulator and market participants through a less formal set-up.
Need
for an SRO:
●
As regulators continue to contemplate,
implement, and refine regulations for the orderly development of the fintech
sector, SROs could play a pivotal role
in the fintech industry by promoting responsible practices and maintaining
ethical standards.
●
There have been many instances where a few
fintech players were involved in unethical practices such as charging
exorbitant higher interest rates and harassment of borrowers for recovering
loans.
Features
of Self-Regulatory Organisation:
●
An SRO is a non-governmental organisation that sets and enforces rules and
standards relating to the conduct of entities in the industry (members) with
the aim of protecting the customer and promoting ethics, equality, and
professionalism.
●
SROs typically collaborate with all
stakeholders in framing rules and regulations.
Functions
of an SRO:
●
The recognised SRO will serve as a two-way communication channel between its
members and the RBI. It will work towards establishing minimum benchmarks,
and standards and help instil professional and healthy market behaviour among
its members.
●
SROs will impart training to the staff of
its members and others and will conduct awareness programmes.
●
It will establish a uniform grievance
redressal and dispute management framework across its members.
Significance
of SRO:
●
The self-regulatory processes are
administered through impartial mechanisms such that members operate in a
disciplined environment and accept penal actions by the SRO.
●
An SRO is expected to address concerns
beyond the narrow self-interests of the industry, such as to protect workers,
customers or other participants in the ecosystem.
●
Regulations, standards, and dispute
resolution and enforcement by an SRO get legitimacy not just by mutual
agreement of its members, but also by the efficiency with which self-regulation
is perceived to be administered.
●
Such regulations supplement, but do not
replace, applicable laws or regulations, according to the Reserve Bank of
India.