The Reserve Bank of India (RBI) on Thursday said it had finalised the Omnibus Framework for recognising Self-Regulatory Organisations (SRO) for its Regulated Entities.
Each sector of the regulated entities (RE) including fintechs will have separate SRO and with the finalisation of the framework the RBI will receive applications from various entities seeking to get SRO status.
With the growth of the REs in terms of number as well as scale of operations, increase in adoption of innovative technologies and enhanced customer outreach, a need was felt to develop better industry standards for self-regulation, the central bank said.
“The omnibus framework contains broad parameters viz., objectives, responsibilities, eligibility criteria, governance standards, application process and other basic conditions for grant of recognition, which will be common for any SRO proposed to be recognized by the Reserve Bank,” the RBI said in a circular.
Other sector-specific guidelines like number of SROs, membership etc. will be issued separately by the respective departments of the Reserve Bank wherever a sectoral SRO is intended to be set up.
As per the announcement made in the Statement on Developmental and Regulatory Policies of the Reserve Bank, as part of its Monetary Policy Statement – 2023-24 dated October 06, 2023, a draft framework titled ‘Draft Omnibus Framework for recognising Self-Regulatory Organisations for its Regulated Entities’ was issued for public comments on December 21, 2023.
Based on the examination of the inputs received, the Omnibus Framework has been finalised, the central bank said.
An SRO is expected to operate with credibility, objectivity and responsibility under the oversight of the regulator, to improve regulatory compliance for healthy and sustainable development of the sector to which it caters.
The SRO is expected to operate with transparency, professionalism and independence, in order to foster greater confidence in the integrity of the sector.
Compliance with the highest standards of governance is a pre-requisite for an effective SRO. And it has to be a professionally managed set up, the RBI said.
The Directors of the SRO need to fulfil the ‘fit and proper’ criteria as framed by the Board of the SRO on an ongoing basis and have relevant expertise/experience and be persons of high integrity.
At least one-third of members in the Board of Directors including the chairperson shall be independent and without any active association with the category/class of REs for which the SRO is established. Any change in the directorship or any adverse information about any Director shall be immediately reported to the Reserve Bank.
The Board will ensure that the SRO has adequately skilled human resources and robust technical capability to monitor the sector. The Board will follow transparent practices for establishing its governance processes.
The process of seeking recognition as an SRO will be robust so as to ensure adherence to a set of stringent parameters essential for the critical role it is expected to play, the RBI said.
