
Banks are gearing up to establish a Section 8 entity under the Companies Act to pursue a self-regulatory organisation (SRO) license for the fintech sector, as per sources familiar with the discussions. The move comes following the Reserve Bank of India’s (RBI) framework for SROs in May, aiming to bolster regulatory oversight in fintech.
Collaboration and Strategic Discussions
Senior executives from various banks have indicated plans to collaborate with industry bodies like the Payment Council of India (PCI) to participate in this initiative. Discussions are underway to ensure banks play a pivotal role in shaping the future of fintech regulations.
Importance of Participation
“With the rise of Neo banks and metaverse banking, it’s crucial for banks to stay informed and involved in fintech advancements,” emphasized a senior bank executive, speaking anonymously. The proposed Section 8 firm, facilitated by the Indian Banks’ Association (IBA), aims to centralize industry efforts under one regulatory umbrella.
Strategic Considerations and Partnerships
Executives highlighted ongoing partnerships with fintech firms for digital solutions such as online lending platforms and AI-driven credit assessments. There’s a strategic evaluation underway whether banks should establish their own SRO or align with existing fintech entities like PCI.
Regulatory Framework and Compliance
The RBI’s guidelines permit multiple SROs in fintech, emphasizing mandatory membership for fintech firms in at least one SRO. The effectiveness of SROs will hinge on comprehensive membership agreements that ensure industry-wide adherence to regulatory standards and conduct codes.