Mumbai, Jan 16 (KNN) the Reserve Bank of India has encouraged Indian financial technology companies to form a self-regulatory organization (SRO) aimed at ensuring statutory and regulatory compliance.

The RBI introduced this proposal through a draft framework released on Monday, emphasising the need for such an organisation to fortify governance standards and effectively address the evolving needs and challenges within the fintech sector.

RBI Governor Shaktikanta Das had previously urged fintech firms to consider the establishment of such a self-regulatory body back in September.

The draft framework arrives at a pivotal moment for the fintech industry, experiencing rapid growth driven by escalating demand for digital payments and borrowings.

Within the proposed framework, self-regulation emerges as a preferred approach to achieve the balance within the fintech sector.

The SRO, as per draft norms, would ensure strict adherence to industry standards and facilitate a transparent communication channel with the RBI.

Moreover, the organisation is expected to collaborate with the RBI in developing and updating the taxonomy for fintechs, undertaking assigned tasks, and providing information as directed by the central bank.

The RBI retains the authority to inspect the books of the SRO or arrange for their audit.

In establishing a robust governance structure, the SRO's board is mandated to implement a framework for the continuous monitoring of the 'fit and proper' status of its directors.

The RBI has opened the draft framework for public feedback until the end of February, following which a final framework will be issued.

This move reflects the central bank's commitment to fostering a regulatory environment that promotes compliance while accommodating the dynamic growth of the fintech sector.

(KNN Bureau)