RBI invites applications for recognising SROs for NBFCs

On 19th June, 2024, the Reserve Bank of India (RBI) invited applications for recognizing Self Regulatory Organizations (SROs) for NBFC sector under RBI’s framework.

Within a period of one year after recognition as an SRO, or before commencement of operations, the applicant must achieve a minimum net worth of Rs. 2 crore. For the NBFC sector, a maximum for two SROs will be recognized.

The RBI, in the month of March, 2024, issued the framework for the recognition of SROs for its regulated entities. A minimum benchmark is required to be established by SROs for their members. In the framework, broad parameters are specified, such as the SROs’ objectives, eligibility criteria, responsibilities, governance standards and application process.

SROs, according to RBI, enhance the regulations’ effectiveness by drawing upon the technical expertise of practitioners and also assist in framing and fine tuning regulatory policies by offering their inputs on both practical and technical aspects.

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While inviting applications for SROs, RBI said, “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.”

RBI further said that the recognized SRO shall have a good mix of NBFC-ICCs, HFCs and NBFC-Factors as its members.

According to the Scale Based Regulatory Framework, the SRO should include at least 10% of all NBFCs classified as NBFC-ICC and NBFC-Factor as members in order to guarantee fair representation for smaller NBFCs.

According to RBI, if the SRO does not attain the aforementioned membership within a period of two years after being granted the recognition, their recognition may be revoked. 

The deadline for filing SRO application is 30th September, 2024.