On 21st December 2023, the Reserve Bank of India (RBI) released the Draft Omnibus Framework for recognising Self-Regulatory Organisations (SROs) for Regulated Entities (REs) (hereafter “the draft Omnibus Framework“) (Reserve Bank of India, 2023). The draft Omnibus framework lays out a) the characteristics, b) the objectives and responsibilities, and c) the licensing and governance framework for prospective SROs for the REs of the RBI. Soon after, on 15th January 2024, the RBI released the Draft Framework for Recognising Self-Regulatory Organisations for FinTech Sector (hereafter “the draft FinTech Framework“) (Reserve Bank of India, 2024). The draft FinTech Framework also lays out similar guidelines for prospective SROs in the FinTech sector.
In this response, we present our comments primarily to the former, but significantly implicating the latter. We include both frameworks since they cover similar subject matter – the creation of an SRO. However, the Omnibus Framework targets a collection of regulated entities (REs), whereas the FinTech Framework targets a specific sector or an activity. Thus, a combined response allows us to comment on the overlapping subject and, at the same time, address sectors that are not entirely captured by one framework.
Our comments on the frameworks are across three key themes. Firstly, we discuss the need to introduce an explicit responsibility of the SRO towards the customers. These responsibilities include reducing information asymmetry, encouraging product suitability, focusing on improved and effective data protection practices and providing a grievance redress mechanism. Under the second theme, we discuss how some of the current responsibilities towards the members of the SROs are misplaced and should be subsumed under the new set of responsibilities towards the customers. Finally, we submit that the key precursor to the operationalisation of the frameworks is the identification of a sector to which such a framework must apply. Thus, in the third theme, we discuss the need for greater clarity, and propose a few approaches, regarding identifying such sectors.
The full response is available here.