The Reserve Bank of India (RBI) on Wednesday invited applications for recognition of SROs for the NBFC sector.
The applications are invited under the aegis of RBI’s ‘Omnibus Framework for recognition of Self-Regulatory Organisations for Regulated Entities of the Reserve Bank’ dated March 21, 2024.
In March, the RBI said that each sector of the regulated entities (RE) will have a separate SRO and with the finalisation of the framework the RBI will receive applications from various entities seeking to get SRO status.
While releasing the framework, the central bank had said that with the growth of the REs in terms of number as well as scale of operations, increase in adoption of innovative technologies and enhanced customer outreach, a need was felt to develop better industry standards for self-regulation.
What is the membership criteria for NBFC SROs?
According to the RBI, the SRO for NBFC sector is primarily envisaged for NBFCs in the categories of Investment and Credit Companies (NBFC-ICCs), Housing Finance Companies (HFCs) and Factors (NBFC-Factors). However, the SRO may also have other categories of NBFCs as its members
The recognized SRO shall have a good mix of NBFC-ICCs, HFCs and NBFC-Factors as its members, it said.
To ensure fair representation to smaller NBFCs, the SRO shall have at least 10% of the total number of NBFCs in the Base Layer as per Scale Based Regulatory Framework and categorised as NBFC-ICC and NBFC-Factor, as its members.
The RBI has also highlighted that the failure to achieve the aforesaid membership, within two years of the grant of recognition as SRO, would render the SRO liable for revocation of the recognition granted.
What are the terms of recognition of SROs?
As per the details laid down by the RBI, the applicant should achieve a minimum net worth of Rs 2 crore within a period of one year after recognition as an SRO, or before commencement of operations as an SRO, whichever is earlier.
A maximum of two SROs for the NBFC sector will be recognised, subject to the applicants fulfilling the prescribed criteria to the satisfaction of the Reserve Bank.
The guidelines as given in the omnibus framework for recognition of SRO for REs of the Reserve Bank, shall be adhered to for application, recognition and functioning of the SRO.
Further, the RBI said that different verticals/ divisions within the SRO may be set up for catering to different categories of NBFCs, as considered necessary.
