Reserve Bank of India (RBI) has officially recognised the Fixed Income Money Market and Derivatives Association of India (FIMMDA) as a Self-Regulatory Organisation (SRO) in financial markets. This move marks regulatory shift in India’s financial ecosystem, from FIMMDA’s earlier advisory role to a more authoritative regulatory function and enabling more market-based governance and accountability.
About FIMMDA
- Full Form: Fixed Income Money Market and Derivatives Association of India
- Established: 1998
- Members Include:
- Scheduled Commercial Banks
- Primary Dealers
- Public Financial Institutions
- Insurance Companies
- Other financial market participants
Key Functions
- Acts as a calculation agent for daily valuation of government securities and corporate bonds.
- Administers key benchmarks, including: FIMMDA–NSE Overnight MIBOR
- Recognised by RBI as the benchmark administrator for all Indian Rupee interest rates.
What is a Self-Regulatory Organisation (SRO)?
An SRO is a non-governmental industry body formed by members of a sector to regulate and oversee the conduct of its participants.
Key Features:
- Sets and enforces rules and standards for members.
- Promotes ethics, professionalism, equality, and customer protection.
- Administers rules through impartial and structured mechanisms.
- Members accept disciplinary actions issued by the SRO.
- Operates with some regulatory autonomy, though under general government oversight.
- Functions as an industry watchdog to deter fraud and unprofessional conduct.
- Derives authority from internal agreements or external consensus, not from direct government legislation.
Background & Regulatory Framework
August 2024:
- RBI released a Framework for Recognition of SROs in Financial Markets regulated by the central bank.
- This framework outlines:
- Objectives; Eligibility Criteria; Responsibilities; Membership Structure; Governance Norms; Application Process for SRO recognition
Recent Development:
- FIMMDA applied under the new framework.
- RBI has now officially recognised FIMMDA as an SRO for the financial markets.
Significance of Move
- Enhances market discipline and self-governance in the financial system.
- Delegates monitoring and regulatory responsibilities to an industry-led body.
- Encourages collaborative rule-making with market participants.
- Strengthens transparency, efficiency, and investor protection in money, bond, and derivatives markets.
- Reduces regulatory burden on RBI by enabling delegated oversight through an SRO structure.