Introduction to the New Framework
On March 21, 2024, the Reserve Bank of India (RBI) established the ‘Omnibus Framework for Recognising Self-Regulatory Organisations (SROs) for Regulated Entities (REs)’. This framework aims to set universal standards for the objectives, responsibilities, eligibility, governance, and application procedures for all SROs recognized by the RBI.
Detailed Provisions
- Sector-Specific Guidelines: Each sector under the REs will have its designated SRO, with specific guidelines on the number of SROs and membership criteria provided by relevant RBI departments.
- Grandfathering Existing SROs: SROs already recognized will continue under their original terms unless explicitly included under this new framework.
Importance of SROs
- Regulatory Enhancement: SROs utilize industry expertise to elevate regulatory standards, advise on technical aspects, and foster innovation and fair competition.
- Policy Development: They play a crucial role in refining policies, enhancing transparency, and bolstering consumer protection.
Framework Highlights
- Reporting and Governance:
- Annual reports must be submitted to the RBI within three months after the fiscal year-end.
- SROs must operate as not-for-profit entities, structured under Section 8 of the Companies Act, 2013.
- Oversight and Compliance:
- The RBI reserves the right to inspect SRO books or have them audited if necessary.
- Recognition can be revoked if an SRO’s operations are found detrimental to public interest.
- Operational Standards:
- SROs are expected to maintain high governance standards and operate transparently and independently.
- At least one-third of the Board, including the chairperson, should be independent.
Additional RBI Directives
- Agency Banks Operations on Fiscal Year-End:
- To accommodate the fiscal year closing on March 31, 2024, which is a Sunday, the RBI has directed all agency banks to keep their branches open to ensure all government transactions are processed.
- Extended Deadline for Financial Literacy Ideathon:
- The submission deadline for the Financial Literacy Ideathon for postgraduate students has been extended from March 20, 2024, to April 15, 2024, to foster greater participation.
Recent Regulatory Approvals
- Fintech and Payment Aggregators:
- Final approvals have been granted to Juspay Technologies, Decfin Tech, and Zoho Payment Technologies to operate as Payment Aggregators.
- Enhancement of NEDs Remuneration:
- The remuneration ceiling for Non-Executive Directors (NEDs) of banks has been raised from Rs 20 lakh to Rs 30 lakh per annum.
Summary
The RBI’s new Omnibus Framework introduces comprehensive standards for SROs, which will streamline self-regulation across various financial sectors, ensuring better governance, transparency, and consumer protection. These measures, along with operational directives for agency banks and ideathon extensions, highlight the RBI’s proactive stance in enhancing India’s financial regulatory landscape.
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