peekpublishersTLDR:
– The RBI has published a draft framework for setting up a self-regulatory organization (SRO) for fintech companies in India.
– The SRO is expected to address concerns around data privacy, cyber security, grievance handling, and poor lending standards.
The Reserve Bank of India (RBI) has released a draft framework for the establishment of a self-regulatory organization (SRO) for fintech companies in India. The move comes as the RBI recognizes the potential impact of fintechs on financial stability, particularly concerning issues like data privacy, cyber security, grievance handling, and poor lending standards.
India’s fintech industry is largely unregulated, and as the sector continues to grow rapidly, concerns over fraudulent loan apps and the rush to roll out new products and services have raised the need for regulation. The SRO would serve as a non-governmental organization responsible for fostering transparency, fair competition, and consumer protection within the fintech industry.
The draft framework outlines the broad functions, governance standards, and eligibility criteria for the SRO. It also emphasizes the importance of engagement with the RBI, industry developments, and the development of a code of conduct for fintech companies. Additionally, the SRO is expected to put in place a phased regulatory compliance plan.
India’s fintech industry is projected to reach $150 billion by 2025, making it the largest fintech ecosystem in terms of the number of entities. The RBI believes that the sector could contribute to approximately 13% of the global fintech industry’s total revenue by 2030.
Several industry bodies, such as the Fintech Association for Consumer Empowerment, Digital Lenders Association of India, Payment Council of India, and Fintech Convergence Council, are expected to apply for an SRO license. The RBI has also raised questions about the incentives for membership and the number of SROs that would require recognition.
Overall, the draft framework for the SRO highlights the importance of regulation in addressing the challenges and concerns surrounding fintech companies in India. By establishing an SRO, the RBI aims to foster transparency, fair competition, and consumer protection in the rapidly growing fintech industry.
