RBI publishes invitation for recognition of Self-Regulatory Organizations (SROs) for NBFCs

The Reserve Bank of India (RBI) had previously issued an ‘Omnibus Framework for recognition of Self-Regulatory Organizations for Regulated Entities of the Reserve Bank’ on March 21, 2024. Under this framework, the RBI had specified broad parameters for appointment of self-regulatory bodies and mentioned that more specific parameters would be issued subsequently.

The RBI has now released the eligibility criteria and guidelines for SROs to be appointed for the NBFC sector. The relevant details regarding the same have been elaborated below:

Membership Criteria for the SRO for NBFCs

The SRO to be appointed for this sector are primarily in respect of NBFCs in the categories of investment and Credit Companies (NBFC-ICCs), Housing Finance Companies (HFCs) and Factors (NBFC-Factors). The guidelines specify that the SRO should have a good mix of NBFC-ICCs, HFCs and NBFC-Factors. Further, it has also been specified that the SRO’s membership shall consist of at least 10% of the total number of NBFCs in the Base Layer as per Scale Based Regulatory Framework and categorised as NBFC-ICC and NBFC-Factor.

The guidelines also specify that failure to achieve the aforesaid membership within two years from the grant of recognition of SRO would render the SRO liable for revocation of its recognition.

The guidelines, however, specify that the SRO may also have other categories of NBFCs as its members.

Other qualifications

1. The Applicant should have a minimum net worth of INR 2 crores within a period of one year of its recognition as a SRO or before commencement of operations as an SRO, whichever is earlier. The SRO will have to then maintain this on an ongoing basis.
2. There will only be 2 SROs which will be recognized for the NBFC sector.
3. The guidelines provided under the omnibus framework shall have to be complied with by the SROs recognized for the NBFC sector.
4. Different verticals/divisions may be created within the SRO for catering to different categories of NBFCs.

Application process:

Any entity seeking recognition as an SRO may submit their application through e-mail to the Chief General Manager-In-Charge, Department of Regulation, Reserve Bank of India by September 30, 2024.