DLAI appoints Hemachandra, Prasad as independent directors to board

The Digital Lenders Association of India (DLAI), an industry association for digital lenders, appointed Meena Hemachandra and Alok Prasad as independent directors to its Board on Monday.

The appointment of independent directors will ensure stakeholder interests are represented and the association's operations are in compliance with relevant regulations, DLAI said.

Their role would include assisting the board in fulfilling its fiduciary duties, providing independent judgement and constructive challenge on strategic decisions, monitor and evaluating the performance and accountability of executive management and the board committees, among others.

Hemachandra is a former executive director of supervision, the Reserve Bank of India (RBI), and Prasad is the former CEO of MFin; an umbrella body of microfinance institutions (MFIs).

Meanwhile, Fintech associations are anticipating the criteria for eligibility of a self-regulatory organisation (SRO) to include aspects such as the strength of a firm's board governance, legal structure, financial stability, and operational systems.

“The core eligibility criterion may revolve around the legal form of the firms and strength of board governance. Other aspects such as financial stability and operational systems may also play an important role in the final selection process,” said Jatinder Handoo, CEO, DLAI.

He added that the association is expecting the RBI to come up with a communication soliciting interest for SRO application from eligible applicants either by the end of the calendar year or early 2024.

An SRO is a non-governmental organisation that acts as a bridge between industry players and the regulator, and sets standards for the conduct of entities operating in the country. RBI Governor Shaktikanta Das had urged fintech companies to establish an SRO during a speech in September.

Fintech companies believe an SRO can consolidate multiple stakeholders on the back of a framework of common standards. 

"Implementing an SRO structure is instrumental in averting excessive regulation while introducing an additional layer of oversight and communication,” said Madhusudan Ekambaram, co-founder and CEO, KreditBee, a digital lending company.  

“The SRO framework unifies stakeholders by establishing common standards, drawing authority from its membership base and market players. However, to establish legitimacy and credibility, the SRO's efforts necessitate a regulatory framework and recognition from regulatory bodies," Ekambaram said.

Earlier, the Fintech Association for Consumer Empowerment (FACE) adopted an upgraded code of conduct to strengthen customer protection measures among the association's members and the fintech digital lending industry in September.

It said the association has a two-layer framework for member companies to take responsibility for complying with the code of conduct and agree to scrutiny by FACE for compliance reasons as a way to ensure enforcement.

On similar lines, DLAI said it plans to focus on strengthening the compliance and governance for its members and increasing efforts to educate end users or customers about fintech companies.

“We will continue to push for regulatory compliance and compliance with DLAI’s Code of Conduct and support young fintechs through workshops and training. We are also working with our members to develop and implement a stronger customer grievances redressal system, which will be universal across different products being offered by digital lending firms,” Handoo said. 

Ekambaram said striking a balance between profitability and maintaining a customer-centric focus would be a challenge in the self-regulation of the fintech sector.

“The impartial role of regulators becomes paramount in this context, ensuring that industry players navigate this delicate equilibrium. In essence, the SRO framework not only prevents regulatory excess but also fosters collaboration, standardisation, and credibility in the dynamic landscape of fintech lending, with regulators serving as key facilitators in upholding the industry's integrity and customer-centric principles," he added.