Banking Sector Reforms

Self-Regulatory Organizations (SROs) in the Fintech Sector


From UPSC perspective, the following things are important :

Prelims level : Self-Regulatory Organizations (SROs)

Mains level : Not Much


Central Idea

  • In the rapidly evolving landscape of the fintech sector, the Reserve Bank of India (RBI) Governor has called upon fintech entities to establish Self-Regulatory Organizations (SROs).

What is an SRO (Self-Regulatory Organization)?

  • An SRO is a non-governmental entity entrusted with the task of formulating and enforcing rules and standards governing the behaviour of participants within a specific industry.
  • The primary objective of an SRO is to safeguard consumer interests, uphold ethical practices, promote equality, and nurture professionalism within the industry.
  • Typically, SROs collaborate with all industry stakeholders to establish and administer regulations.

Key Characteristics of an SRO

  • Impartial Governance: SROs maintain impartial mechanisms to oversee self-regulatory processes, ensuring that industry members operate within a disciplined framework and accept penalties when necessary.
  • Beyond Industry Interests: SROs extend their concerns beyond the narrow interests of the industry itself. They aim to protect not only industry players but also workers, customers, and other participants in the ecosystem.
  • Supplement to Existing Regulations: While SROs formulate regulations, standards, and mechanisms for dispute resolution and enforcement, they do not replace applicable laws or government regulations. Instead, they complement existing legal frameworks.

Functions of an SRO

  • Communication Channel: SROs serve as intermediaries between their members and regulatory authorities like the RBI, facilitating two-way communication.
  • Establishment of Standards: SROs work to establish minimum benchmarks and industry standards, fostering professionalism and healthy market behavior among their members.
  • Training and Awareness: SROs provide training to their members’ staff and conduct awareness programs to promote industry best practices.
  • Grievance Redressal: They establish uniform grievance redressal and dispute management frameworks to resolve issues within the industry.

Why is an SRO Necessary?

  • As the fintech sector continues to evolve, SROs can play a pivotal role in ensuring the industry’s responsible growth and maintaining ethical standards.
  • They address critical issues such as market integrity, conduct, data privacy, cybersecurity, and risk management.
  • SROs contribute to building trust among consumers, investors, and regulators.

RBI’s Expectations from Fintech Players

  • The Reserve Bank of India expects fintech companies to:
  1. Evolve industry best practices and privacy/data protection norms in compliance with local laws.
  2. Set standards to prevent mis-selling and promote ethical business practices.
  3. Ensure transparency in pricing.
  • RBI Governor has encouraged fintechs to establish an SRO voluntarily.

Benefits of an SRO

  • Industry Expertise: SROs possess deep industry knowledge, making them valuable contributors to industry discussions and educational initiatives.
  • Standardized Conduct: SROs promote a standardized code of conduct that encourages ethical business practices, ultimately boosting confidence in the industry.
  • Watchdog Role: SROs act as watchdogs, preventing unprofessional and unethical practices within the industry.


  • In the dynamic fintech sector, Self-Regulatory Organizations (SROs) emerge as indispensable entities.
  • Their role in shaping industry behaviour, promoting ethical conduct, and safeguarding consumer interests cannot be overstated.

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