RBI Sets ₹10 Crore Net Worth Requirement for Financial Market SROs: New Rules for Debt, FX, and More

The Reserve Bank of India (RBI) announced new guidelines on Monday for setting up self-regulatory organizations (SROs) in financial markets. These SROs must have a minimum net worth of ₹10 crore to be eligible. The RBI is inviting applications from entities that meet these requirements.

The RBI stated that SROs play a key role in promoting compliance among their members and providing a platform for policy discussions. With the growth in the number of regulated entities (REs) and their operations, the adoption of new technologies, and increased customer outreach, there’s a need for better industry standards for self-regulation.

Financial markets covered by this framework include government securities, money markets (like the market for repo in government securities and corporate bonds), foreign exchange markets, and derivatives on interest rates, forex rates, and credit.

Eligibility and Role of SROs

The guidelines specify that an SRO must be set up as a not-for-profit organization with a minimum net worth of ₹10 crore. The SRO should also have the infrastructure necessary to fulfill its duties continuously. The ownership of the SRO must be diversified, with no single entity allowed to hold 10% or more of the capital.

The SRO’s responsibilities include creating best practices, standards, and codes for its members to voluntarily adopt within the regulatory framework. By promoting a culture of compliance and good governance, SROs can reduce the compliance burden on market participants and foster a healthy financial market environment.

SROs will also help resolve disputes among their members or as directed by the RBI, using transparent and consistent dispute resolution or arbitration mechanisms.

Additionally, SROs will represent their members in discussions with the RBI, government authorities, and other regulatory bodies, addressing broader industry concerns. They will also collect and share relevant sectoral information with the RBI to assist in policymaking, encourage innovation, and support the introduction of new products.

The RBI emphasized that SROs can significantly contribute by developing and ensuring adherence to industry standards and best practices. Their role will complement existing laws and regulations, helping to further develop the financial markets by enhancing integrity, professionalism, compliance, innovation, and ethical conduct.