Sahamati’s Feedback on RBI’s Draft Framework for Self-Regulatory Organisations (SROs) for Regulated Entities (REs)

02 Feb 2024

The Draft Omnibus Framework for Recognizing Self-Regulatory Organizations (SROs) for Regulated Entities (REs) under the RBI is a commendable initiative, representing a significant step towards enhancing institutional self-regulatory capacity in the banking and finance sectors. Establishing SROs is crucial for strengthening regulatory capabilities and efficiencies, particularly in implementing, monitoring, and auditing best practice codes of conduct. 

The proposed SRO framework is comprehensive and strategically designed to cultivate governance structures that align with large and critical ecosystems’ distinctive governance needs and characteristics. This framework meets the broad requirements and effectively addresses the nuances of such ecosystems. It is in harmony with the Reserve Bank of India’s (RBI) objectives and the industry’s expectations, aiming to establish an efficient self-regulatory body that can interact seamlessly with industry members and the RBI.

Notably, the framework ensures that SROs are responsible for formulating codes of conduct and guidelines for ecosystem participants. Simultaneously, it empowers SROs to enforce compliance with these codes, addressing breaches through established processes and mechanisms. A noteworthy aspect of the framework is its built-in consultative approach, emphasizing the importance of voluntary participation by ecosystem participants in self-regulation. This consultative element is a fundamental pillar for robust self-governance within any ecosystem. 

SRO for Account Aggregator (AA) Ecosystem

The institutionalization of SROs is poised to substantially boost the Account Aggregator (AA) ecosystem, playing a pivotal role in realizing the nation’s and the regulator’s broader objective of financial inclusion through data empowerment. This involves facilitating consent-based data-sharing mechanisms to enable consumers to use their data for easier access to affordable financial services. 

As the Draft Framework approaches its finalization and progresses toward operationalization, there are specific areas where clarity and guidance from the RBI would significantly benefit entities seeking SRO recognition for the AA ecosystem. This guidance is essential to better prepare during the application process. Several of these areas stem from the distinctive complexities and characteristics inherent in the AA Ecosystem. Sahamati has submitted detailed feedback to the RBI.

Please find the detailed response from Sahamati here.