In a major regulatory reform, the Reserve Bank of India (RBI) has officially recognised the Finance Industry Development Council (FIDC) as a Self-Regulatory Organisation (SRO) for Non-Banking Financial Companies (NBFCs). This initiative aims to enhance governance, promote ethical conduct, and strengthen compliance culture in the expanding NBFC sector.
This move follows RBI’s ‘Omnibus Framework for Recognition of SROs for Regulated Entities (REs)’, issued on March 21, 2024, and the invitation for SRO applications on June 19, 2024.
Why This Matters?
NBFCs are a crucial part of India’s financial system, serving underserved and unbanked segments. However, the growing diversity and complexity of NBFCs demand industry-led governance, peer monitoring, and voluntary compliance — all of which an SRO mechanism can ensure.
By granting SRO status to FIDC, the RBI aims to:
- Foster industry-driven regulation
- Encourage peer accountability
- Enable early detection of compliance risks
- Promote transparency and ethical conduct
Key Highlights
FIDC Selected as First NBFC SRO
- RBI received three applications for SRO recognition in the NBFC space.
- Only FIDC met all the criteria under the Omnibus Framework.
- The other applications were incomplete and hence rejected.
FIDC’s Role as an SRO
As a recognised SRO, FIDC will now:
- Frame and enforce a Code of Conduct for NBFC members.
- Facilitate compliance and regulatory guidance.
- Act as a bridge between NBFCs and the RBI.
- Handle grievances and disputes among NBFCs.
- Promote training, capacity building, and best practices.
This step is expected to enhance accountability, risk management, and supervisory efficiency across the NBFC ecosystem.
Significance of the Development
- Strengthens RBI’s supervisory framework for NBFCs
- Promotes industry discipline through self-regulation
- Encourages collaborative regulation between RBI and industry
- Enhances transparency, ethical conduct, and risk mitigation
- Marks a major step toward responsible growth in the financial sector
About Self-Regulatory Organisations (SROs)
Objective
- To enable industry-led regulation and ensure responsible conduct among members.
Legal Basis
- RBI’s Omnibus Framework for Recognising SROs, 2024.
Eligibility Criteria:
- Must be a not-for-profit company registered under Section 8 of the Companies Act, 2013.
- Should have diversified shareholding (no single entity holding ≥10% capital).
- Must represent a broad base of members in the regulated sector.
Key Responsibilities:
Towards Members–
- Frame code of conduct
- Establish grievance redressal mechanisms
- Resolve disputes and promote discipline
Towards Regulator (RBI)–
- Ensure regulatory compliance
- Detect early warning signals
- Promote innovation and sectoral growth
Governance Framework:
- One-third independent members (including Chairperson) on the Board.
- Defined bye-laws and articles governing SRO operations.
About FIDC (Finance Industry Development Council)
- Established as a representative body of NBFCs registered with RBI.
- Focuses on policy advocacy, regulatory coordination, and industry representation.
- Membership includes leading asset finance and loan NBFCs.
- Plays a key role in regulatory consultations, standard-setting, and industry training.
Significance:
- FIDC’s recognition as SRO will boost governance and self-discipline in the NBFC sector, aligning with RBI’s vision of shared responsibility in financial supervision.
About Non-Banking Financial Companies (NBFCs)
A Non-Banking Financial Company (NBFC) is a company:
- Registered under the Companies Act, 1956/2013,
- Engaged in lending, investment in shares, bonds, debentures, securities, etc.
- Cannot accept demand deposits or issue cheques.
- Not part of India’s payment and settlement system.
Key Functions:
- Offer loans and advances
- Acquire shares, bonds, and securities
- Provide hire purchase and leasing services
- Promote financial inclusion by serving unbanked populations
Status (2024):
- Over 9,000 NBFCs registered with RBI
Major NBFC Categories:
- Investment and Credit Companies (ICCs)
- Infrastructure Finance Companies (IFCs)
- Micro Finance Institutions (NBFC-MFIs)
- Housing Finance Companies (HFCs)
- Core Investment Companies (CICs)
Key Facts
- RBI Headquarters: Mumbai, Maharashtra
- RBI Governor (as of 2025): Shaktikanta Das
- Established: 1 April 1935, under the RBI Act, 1934
- FIDC Headquarters: Mumbai, Maharashtra
- Regulatory Basis for NBFCs: Chapter III-B of the RBI Act, 1934
- Section 45-IA of RBI Act: Registration requirement for NBFCs
- Companies Act, 2013 – Section 8: Provision for not-for-profit companies (under which SROs are registered)
- Previous SRO Recognised by RBI: Fintech Association for Consumer Empowerment (FACE) — 2024