Self-regulatory body for fintechs likely this year, says RBI's Choudhary

fintech

The Reserve Bank of India (RBI) executive director Ajay Kumar Choudhary on October 19 said the central bank doesn't want to go for fintech regulations immediately but a self-regulatory organisation (SRO) is likely to come up within this year.

“Everything has to be done in a phased manner. We don’t want to go for Fintech regulations immediately but what the Governor announced is SRO mechanism that is likely to come within this year,” Choudhary said on the sidelines of 18 Annual Summit & Awards, Banking & Financial Sector Lending Companies.

An SRO is a non-governmental organisation (NGO) that sets monitoring standards for industry players and works as a bridge between the industry and the regulator.

RBI Governor Shaktikanta Das on September 6 urged fintechs to establish an SRO over the next year. "I would like to use this opportunity to urge and encourage the fintechs to establish a self-regulatory organisation themselves," Das said.

“Digital innovations, at times, have also led to cyber-risk and data security-related issues. Illustratively, the mushrooming of illegal loan apps, many of which had their origins in foreign jurisdictions, has led to serious concerns about breaches of data privacy, unethical business conduct, the levying of exorbitant interest rates, and harsh recovery practices.”

The RBI was planning to issue a framework for SROs for regulated entities (REs), Das said after the MPC meeting ealrier this month.

As reported by Moneycontrol, an SRO for the fintech and digital lending industries will come up in the next three to six months.

The Digital Lenders Association of India (DLAI) and the Fintech Association for Consumer Empowerment (FACE) said discussions were on with the RBI to formulate the SRO.

Industry players said the regulatory support in the form of guidelines for digital lending, FLDG, etc. showed that the central bank backed the fintech industry. The SRO would lead to more clarity about the sector's business model, security, growth and the overall business, they said.