The Reserve Bank of India (RBI) has issued an omnibus framework for recognising Self-Regulatory Organisations (SROs) on Thursday that prescribes the broad objectives, functions, eligibility criteria and governance standards, which will be common for all SROs, irrespective of the sector.
The framework lays down the broad membership criteria and other terms and conditions to be followed by the SROs for grant of recognition by the Reserve Bank.
Notably, the announcement for the SRO was made by the Reserve Bank last year in October during its MPC meet.
(Scroll down to read the table for quick takeaway)
What are the characteristics of the SRO?
As per the information shared by the central bank, the SROs will have sufficient authority which is derived from membership agreements to set ethical, professional and governance standards and enforce these standards on the members.
SRO should frame and implement a comprehensive code of conduct for its members, the RBI said.
It should have strong governance mechanisms, including focus on independent board, transparency, and adherence to well-defined processes, it added.
SROs should also put in place well-defined and transparent processes and procedures for overseeing activities of their members.
It should establish clear standards of conduct and specify consequences for violation of agreed rules/ codes such as counselling, cautioning, reprimanding and expelling members.
However, it must be noted that such consequences shall not entail monetary penalties in any manner.
Devise and implement standardised procedures for handling disputes, develop standards for improving compliance culture, and suitable surveillance methods for effective monitoring of the sector are some of the other notable features of the SRO, as mentioned by the RBI.
What will be the role of SROs towards Regulated Entities?
The SROs will be entitled to frame a code of conduct to be followed by the REs and monitor adherence to the code as well as compliance with the regulatory instructions, and also develop a uniform, reasonable and non-discriminatory membership fee structure.
They will disseminate sector-specific information through periodicals, bulletins, pamphlets, magazines, etc., from publicly available data, for creating awareness on matters of interest to members. Further, they will also promote knowledge of statutory/regulatory provisions and provide necessary resources for exchange of expertise and experience among members.
The SROs will also establish a grievance redressal and dispute resolution/ arbitration framework, and educate public about operations of REs, grievance redress mechanisms.
What will be the role of SROs towards RBI?
The SROs need to keep the Reserve Bank of India regularly informed of the developments in the sector such as violation of the provision of the Acts or the rules/ guidelines/ regulations/ directions.
Examine the proposal or suggestion, provide data/information sought by the RBI, and also submit an Annual Report to the RBI, within three months of completion of the accounting year.
Notably, the Reserve Bank may, if it deems necessary, inspect the books of the SRO or arrange to have the books inspected by an audit firm.
Here is the table for quick reference:
Compiled by: Shrishti Sharma
