The fintech sector has experienced tremendous growth and transformation in recent years, revolutionizing the way financial services are accessed and delivered. However, this rapid expansion has also brought forth various challenges, including concerns about data privacy, unethical business practices, and consumer protection. In response to these issues, the Reserve Bank of India (RBI) has released a draft framework for establishing Self-Regulatory Organizations (SRO) within the fintech industry. This draft framework aims to empower the sector to function responsibly and innovatively while ensuring compliance with regulatory standards. In this article, we will explore the key aspects of the draft framework, including the eligibility criteria, functions and responsibilities, governance standards, and the potential impacts on the fintech ecosystem.

Understanding the Draft Framework for Fintech SRO

The draft framework for fintech SRO provides a comprehensive and structured approach to self-regulation within the fintech sector. It outlines the essential characteristics, functions, and governance standards that SROs should adhere to. The RBI emphasizes the importance of self-regulation in achieving a balance between fostering industry innovation and meeting regulatory priorities to protect consumers and mitigate risks. The draft framework encourages responsible conduct, ethical practices, and adherence to industry standards within the fintech sector.

What are Fintech SROs?

Fintech Self-Regulatory Organizations (SROs) are non-governmental bodies established to set and enforce industry rules and standards. They act as intermediaries between the fintech industry and regulatory authorities, ensuring compliance with regulatory requirements and promoting responsible conduct. SROs play a crucial role in maintaining industry integrity, protecting consumer interests, and fostering trust within the sector.

Eligibility and Membership Criteria

To establish an SRO within the fintech sector, certain eligibility criteria must be met. The applicant should be a not-for-profit company registered under Section 8 of the Companies Act, 2013. The SRO should have sufficient net worth and demonstrate the capability to establish the necessary infrastructure to fulfill its responsibilities effectively. The draft framework encourages comprehensive membership, representing entities of all sizes, stages, and activities within the fintech sector. Membership in the SRO should be voluntary, with fintech companies being encouraged to join a recognized SRO-FT.

Functions and Responsibilities of Fintech SROs

Fintech SROs are entrusted with several key functions and responsibilities to ensure the responsible and ethical conduct of their members. These include:

  1. Setting Standards and Code of Conduct: SROs establish industry standards, guidelines, and a code of conduct for their members. These standards aim to promote transparency, fairness, and responsible behavior within the fintech sector.
  2. Communication and Collaboration: SROs act as intermediaries between their members and regulatory authorities, facilitating open channels of communication and collaboration. They provide a platform for industry-specific concerns to be effectively conveyed and addressed.
  3. Training and Education: SROs offer training and education programs to enhance their members' understanding of regulatory requirements, compliance measures, and emerging industry trends. This helps members stay updated and adapt to evolving regulations and market dynamics.
  4. Dispute Resolution: SROs establish mechanisms for resolving disputes and grievances within the industry. These mechanisms ensure that conflicts are addressed impartially and in a timely manner, promoting trust and confidence among stakeholders.
  5. Compliance and Enforcement: SROs monitor and enforce compliance with industry standards, regulations, and the code of conduct. They play a vital role in ensuring that members adhere to established rules and guidelines, promoting a culture of compliance within the fintech sector.

Governance and Management of Fintech SROs

The draft framework emphasizes the importance of effective governance and management within fintech SROs. It highlights the need for independence, impartiality, and transparency in their operations. SROs should operate free from the influence of any single member or group of members to ensure unbiased decision-making and prevent the organization from being swayed by the interests of a few. The framework also emphasizes the need for a well-defined governance structure, including a board of directors and key managerial personnel, who possess professional competence, integrity, and meet the fit and proper criteria.

Key Aspects of the Draft Framework

The draft framework for fintech SROs encompasses several key aspects that ensure the responsible and effective functioning of these organizations. These include:

  1. Comprehensive Membership: The SRO should represent the entire fintech sector, encompassing entities of all sizes, stages, and activities. The framework encourages the inclusion of a diverse range of industry players to foster inclusivity and draw upon collective expertise and experience.
  2. Development-Oriented Approach: SROs should actively contribute to the growth and evolution of the fintech industry. This includes providing specialized knowledge, offering guidance, and contributing to capacity building through training programs. SROs should also prescribe minimum eligibility criteria for their members to ensure professionalism and competence within the sector.
  3. Impartiality and Independence: SROs should maintain impartiality, avoid conflicts of interest, and ensure unbiased oversight over their members. Independence enhances the reputation of SROs as neutral and reliable entities, gaining the trust of both industry participants and regulators.
  4. Compliance and Consumer Protection: SROs should guide their members to adhere to relevant laws, regulations, and industry standards. They should address grievances, conflicts of interest, and disputes among their members, fostering a fair and competitive environment. SROs should play a crucial role in promoting responsible innovation and ensuring consumer protection.

How the Framework Benefits the Fintech Ecosystem

The draft framework for fintech SROs brings several benefits to the fintech ecosystem, including:

  1. Enhanced Industry Standards and Ethics: SROs promote responsible conduct, ethical practices, and adherence to industry standards. This enhances the integrity and professionalism of the fintech sector, fostering trust among consumers, investors, and regulators.
  2. Effective Communication and Collaboration: SROs act as a bridge between industry players and regulatory authorities, facilitating effective communication and collaboration. They ensure that industry-specific concerns are effectively conveyed and addressed, leading to a more collaborative regulatory environment.
  3. Consumer Protection: SROs prioritize consumer protection by setting stringent standards for member firms. This includes safeguarding customer data, ensuring fair lending practices, and addressing customer complaints promptly. Consumers benefit from increased accountability and protection.
  4. Reduced Regulatory Burden: SROs play a crucial role in reducing the regulatory burden on regulatory authorities like the RBI. By enforcing industry-specific regulations and standards, SROs contribute to a more efficient and streamlined regulatory process.

Potential Impacts on the Fintech Sector

The establishment of fintech SROs has the potential to significantly impact the fintech sector in India. It promotes responsible innovation, ensures compliance with regulatory requirements, and fosters a culture of professionalism and ethical conduct within the industry. SROs provide a platform for industry players to collaborate, share knowledge, and address common challenges. They also serve as a trusted intermediary between the industry and regulators, facilitating effective communication and understanding of industry-specific concerns. The establishment of SROs demonstrates the commitment of the fintech sector to self-regulation and responsible growth.


The draft framework for fintech SROs introduced by the RBI reflects a significant step towards promoting responsible conduct, ethical practices, and adherence to industry standards within the fintech sector. The establishment of SROs empowers the industry to function responsibly, innovate within a regulated environment, and ensure consumer protection. By fostering collaboration, setting industry standards, and promoting professionalism, SROs contribute to the growth and development of the fintech ecosystem in India. The feedback and suggestions received during the consultation period will further refine the framework and pave the way for the establishment of effective and impactful fintech SROs.