On Monday, the Reserve Bank of India announced a framework for recognizing self-regulatory organizations in the financial markets arena, which will assist promote compliance culture and provide a consultation forum for policy making.
According to the central bank, suggested self-regulatory organizations (SROs) can play an important role in setting industry standards and best practices and ensuring that members follow them. The self-regulation will supplement India's legislative and regulatory structure, it stated.
"In carrying out this role, the SRO shall develop the necessary best practices/standards/codes within the regulatory framework prescribed by the Reserve Bank of India for voluntary adoption by its members," the RBI stated, adding they would not be a substitute for the regulatory framework.
SROs will be required to accomplish a set of broad objectives for the benefit of the sector they represent, as well as solve important industry issues. They will also set minimal standards and conventions for professional market conduct.
The SROs would be expected to collaborate with the RBI to improve compliance with regulatory norms and detect early warning signs, among other things. The central bank may remove an SRO's recognition if it believes the body's operations are damaging to the public interest or if the SRO is discovered to be carrying out actions that are inconsistent with its aims.
