Context: Reserve Bank of India (RBI) Governor has asked fintech entities to form a Self-Regulatory Organisation (SRO). 

More About News:

• There have been many instances where a few fintech players were involved in unethical practices such as charging exorbitant higher interest rates and harassment of borrowers etc.
  • For instance, Hyderabad Police has reportedly busted an Rs 903 Cr money laundering fraud involving a China-based illegal investment application.
• The self-regulatory processes of fintech entities are administered through impartial mechanisms.

About Self Regulatory Organisations:

• An SRO is a non-governmental organisation that sets and enforces rules and standards relating to the conduct of entities in the industry (members).
• Aim:  Protecting the customer and promoting ethics, equality, and professionalism.
• Framing of Rules: SROs typically collaborate with all stakeholders in framing rules and regulations.
• Recognition: Reserve Bank of India will be authority of issuing letters of recognition.

Functions of an SRO:

• Establishing codes of conduct: To foster transparency, fair competition, and consumer protection.
• Watchdog: It encourages members to adopt responsible and ethical practices.
• Linkage: It can provide a link between the regulator and market participants through a less formal set-up.
• Others: SRO is expected to address concerns such as to protect workers, customers or other participants in the ecosystem.

News Source: Indian Express