RBI Lays Down Omnibus Framework For Self-Regulatory Entities

The Reserve Bank of India has laid down an omnibus framework for recognising self-regulatory entities to ensure broad objectives, functions, eligibility criteria and governance standards.

The framework will be common for all SROs, irrespective of the sector, the central bank said in a release on Thursday.

"Reserve Bank may prescribe sector-specific additional conditionalities, if warranted, at the time of calling for applications for recognising SROs for a category or class of regulated entities within the broad contours of this framework," the RBI said.

The existing SROs will continue to be governed by the RBI as they are, unless the new framework is specifically extended to such SROs, it said.

The RBI mentioned a four-point objective of an SRO, which includes compliance among members by promoting progressive practices as well as providing guidance and support to smaller entities. The SRO should frame and implement a comprehensive code of conduct for its members, the RBI said.

Further, the SROs must collect and share relevant information related to the sector with the central bank to aid in policymaking. Innovation and research are encouraged while ensuring compliance and self-governance, the RBI said.

The central bank has listed the eligibility criteria for entities looking to function as an SRO:

• Applicant should be set up as a not-for-profit company under the Companies Act, 2013.

• Applicant must have adequate net worth and should be able to create infrastructure to enable operations as an SRO on a continued basis.

• Applicant must have the specified membership or should have submitted the roadmap for obtaining membership within a reasonable timeline.

• Neither the applicant nor any of its directors should be involved in any legal proceeding.

An entity looking to function as an SRO under the framework must submit its application along with a copy of the Memorandum of Association relating to the constitution of the SRO, a copy of the Articles of Association of the SRO, details of the constitution of the board, their roles and the manner in which its operations would be undertaken. Duties of office bearers of the SRO must be submitted as well.

In addition, a roadmap to achieve minimum membership criteria within the prescribed timeline and an application signed by the authorised person on behalf of the applicant under the authority of its board must be submitted.

Membership in the SRO will be prescribed by the RBI at the time of inviting applications for each category and must be attained at the time of application. This must not exceed two years from the date of recognition by the RBI, the central bank said.

The membership of SRO shall be voluntary for the members, it said.