SELF REGULATION ORG. FOR FINTECH (Syllabus: GS Paper 3 – Economy)

Context: The Reserve Bank of India has approved the Fintech Association for Consumer Empowerment as the fintech industry’s first self-regulatory organisation (SRO-FT).

Benefits of Self-Regulation

• Balance for Regulators: Self-regulation helps regulators balance fintech creativity with the risks it poses to the financial system.
• Self-Discipline in Industry: Self-regulation fosters a culture of self-discipline and strong internal governance among fintech entities.
• Orderly Sector Development: It creates an environment conducive to the organised and orderly development of the fintech sector.
• Adaptability to Technological Advancements: This approach allows the industry to effectively adapt to rapid technological changes and evolving market dynamics.

SRO-FT

• About: It is an industry-led entity that establishes and enforces regulatory standards, promotes ethical conduct, ensures market integrity, resolves disputes, and fosters transparency and accountability among its members.
• Operate under: Reserve Bank of India (RBI)
• Promotes Ethical Conduct: SRO-FT fosters ethical behavior and integrity among its members, ensuring that businesses operate responsibly.
• Ensures Market Integrity: It works to maintain the stability and fairness of the fintech market, ensuring that members comply with regulations.
• SRO Memberships Allowed: Fintech entities are allowed to join multiple SROs and are encouraged to participate in at least one.
• Data Collection for Research and Policymaking: SRO-FT collects and shares data on member activities, aiding research, trend analysis, and policymaking to strengthen sector development.
• Eligibility and membership Criteria: SRO-FT must be a not-for-profit company registered under Section 8 of the Companies Act, 2013, with diversified shareholding where no single entity holds 10% or more of the share capital, either individually or in concert. 

oWithin a year of recognition or before commencing operations (whichever is earlier), it must have a minimum net worth of Rs 2 crore. 

• FACE as the first SRO-FT: It is a self-regulatory industry body for fintech lenders in India. 

oFounded: 2020 by the fintech lenders Cashe, LoanTap, Fibe, KreditBee and Paysense.

oMembers: it has nearly 50 members.

oRBI recognised FACE as India’s first SRO-FT. FACE promotes responsible lending and borrowing by setting industry standards and ensuring ethical practices among its members.