RBI releases draft omnibus framework for SROs, seeks views
- The RBI recently published a draft omnibus framework, seeking comments from stakeholders.
- The framework aims to establish guidelines for recognizing Self-Regulatory Organizations (SROs) to enhance industry standards for regulated entities.
Rationale for the Framework
- Rapid growth of Regulated Entities (REs) in terms of number and scale, coupled with increased adoption of innovative technologies.
- This growth has made effective regulation challenging for the RBI.
- The draft framework outlines broad parameters applicable to any SRO.
- It covers objectives, responsibilities, eligibility criteria, governance standards, application process and basic conditions for SRO recognition.
Self-Regulatory Organisation (SRO)
- An SRO is a non-governmental organisation that sets and enforces rules and standards relating to the conduct of entities in the industry.
- SROs typically collaborate with all stakeholders in framing rules and regulations.
- SROs already recognized by the RBI will continue under their existing terms and conditions unless the new framework is specifically extended to them.
Role and Responsibilities
- SROs are expected to pursue overarching objectives that contribute to the betterment of their represented sector.
- SROs are tasked with developing and adhering to self-regulatory principles conducive to sector advancement.
- SROs should establish a comprehensive code of conduct for members and minimum benchmarks and conventions for professional market conduct among members.
Protection of Interests
- SROs are also required to protect the interests of customers, depositors, participants, and other stakeholders within the sector.
- They are envisioned as allies of the RBI in ensuring compliance, sector development, stakeholder protection, fostering innovation and detecting early warning signals.
Transparency and Governance
- SROs are expected to operate with transparency, professionalism, and independence to build confidence in the sector's integrity.
- Compliance with the highest governance standards is deemed essential for effective SRO functioning.
Prelims Takeaway
- Self-Regulatory Organisation (SRO)
- Reserve Bank of India (RBI)