RBI invites applications for recognising SROs for NBFCs under its framework

The Reserve Bank on Wednesday invited applications for recognition of Self-Regulatory Organisations (SROs) for the NBFC sector under the central bank's omnibus framework.

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.

A maximum of two SROs for the NBFC sector will be recognised.

In March, RBI had issued the framework for recognising SROs for its regulated entities. SROs would be required to establish minimum benchmarks for their members. The framework specified broad parameters, like objectives, responsibilities, eligibility criteria, governance standards, and application process for SROs.

According to RBI, SROs enhance the effectiveness of regulations by drawing upon the technical expertise of practitioners and also aid in framing/ fine-tuning regulatory policies by providing inputs on technical and practical aspects.

"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 said while inviting applications.

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

To ensure fair representation to smaller NBFCs, the SRO should have at least 10 per cent 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.

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, RBI said.

Applications can be filed by September 30, 2024.