News Excerpt:

The Reserve Bank of India (RBI) had recently finalized the Omnibus Framework for recognising Self-Regulatory Organisations (SRO) for its Regulated Entities.

Key frameworks for SROs in regulated entities:

• Each regulated entity sector (RE), including fintechs, will have a separate SRO.
• With the finalization of the framework, the RBI will receive applications from various entities seeking to get SRO status.
• The omnibus framework contains broad parameters viz., objectives, responsibilities, eligibility criteria, governance standards, application process and other basic conditions for grant of recognition, which will be common for any SRO proposed to be recognized by the Reserve Bank.
• Other sector-specific guidelines, such as the number of SROs, membership, etc., will be issued separately by the respective departments of the Reserve Bank wherever a sectoral SRO is intended to be set up.

Need of Industry standard:

• To develop better industry standards for self-regulation Industry standard need was felt because:
• Growth of the REs in terms of number as well as scale of operations, 
• increase in adoption of innovative technologies and 
• enhanced customer outreach

About Self-Regulatory Organisations (SRO):

• An SRO is expected to operate with credibility, objectivity and responsibility under the oversight of the regulator to improve regulatory compliance for the healthy and sustainable development of the sector to which it caters.
• The SRO aims to work transparently, professionally, and independently, increasing trust in the sector's integrity.
• Compliance with the highest governance standards is a prerequisite for an effective SRO.
• The SRO directors need to fulfill the ‘fit and proper’ criteria as framed by the Board on an ongoing basis, have relevant expertise/experience, and be persons of high integrity.
• At least one-third of the members of the Board of Directors, including the chairperson, shall be independent and without any active association with the category/class of REs for which the SRO is established.
• The Board will ensure that the SRO has adequately skilled human resources and robust technical capability to monitor the sector. 
• The Board will follow transparent practices to establish its governance processes.
• The process of seeking recognition as an SRO will be robust to ensure adherence to a set of stringent parameters essential for the critical role it is expected to play.