Facts for Prelims (FFP)
Context: The Reserve Bank of India (RBI) has proposed the establishment of a Self-Regulatory Organisation (SRO) for fintech entities.
What are fintech entities?
Fintech entities are financial technology companies that leverage technology to provide innovative financial services and solutions. They often operate in areas such as digital payments, lending, investing, insurance, and wealth management. Examples of fintech entities include Paytm, PhonePe, PolicyBazaar, Zerodha, CRED etc.
What is an SRO?
An SRO is a non-governmental organization that sets and enforces industry rules to protect customers, and promote ethics, equality, and professionalism. They ensure compliance through impartial mechanisms, maintaining discipline and enforcing penalties.
- SRO regulations complement existing laws and regulations.
The need for SROs in fintech:
- Promoting Responsibility: SROs promote responsible practices and ethics in fintech to prevent unethical behaviours like excessive interest rates and borrower harassment.
- Building Trust: They address issues like market integrity, data privacy, and cybersecurity, building trust among consumers, investors, and regulators.
Functions of SROs:
- Communication: Serve as a link between members and regulatory bodies like the RBI.
- Standards: Set industry benchmarks and encourage professional conduct.
- Training: Provide member training and awareness programs.
- Dispute Resolution: Establish a uniform grievance resolution framework.
Advantages of SROs:
- Expertise: SROs offer industry expertise and insights to members.
- Ethical Standards: They enforce ethical standards, enhancing industry trust.
- Oversight: Act as watchdogs, preventing unprofessional practices.