RBI Recognises FIDC as Self‑Regulatory Organisation for NBFCs

The Reserve Bank of India (RBI) has officially granted Self‑Regulatory Organisation (SRO) status to the Finance Industry Development Council (FIDC), a major step toward improving regulatory oversight of India’s fast-expanding Non-Banking Financial Company (NBFC) sector. This recognition aims to foster better self-governance, early risk identification, and improved industry standards through collective responsibility.

What Is an SRO?

An SRO is a non-governmental entity recognised by a regulator (like RBI) to regulate, monitor, and guide an industry sector. RBI’s Omnibus Framework for Recognising SROs (2024) outlines key eligibility criteria,

• Must be a Section 8 not-for-profit company
• Should have diversified ownership (no single entity holding over 10%)
• Must ensure sufficient net worth and sector representation

SROs are empowered to set industry standards, enforce codes of conduct, resolve disputes, educate borrowers, and flag early signs of financial stress or misconduct to regulators.

Why the NBFC Sector Needs an SRO

Expanding Sector, Regulatory Challenges

• NBFCs today contribute to nearly one-third of India’s total lending, serving crucial segments like MSMEs, vehicle finance, housing, and micro-enterprises.
• Their growth has introduced both opportunities and risks, necessitating closer monitoring and regulation.

Past Crises & Systemic Risks

• Incidents such as the IL&FS default in 2018 revealed deep-rooted issues in liquidity management, asset-liability mismatches, and corporate governance within some NBFCs.

Oversight Burden on RBI

• RBI directly regulates thousands of NBFCs, creating a massive supervisory workload.
• An SRO like FIDC can act as an extended regulatory arm, easing RBI’s burden while improving sector-wide compliance.

Role of FIDC as an SRO

As the first entity to receive SRO status for NBFCs, FIDC now holds key responsibilities, including,

• Drafting and enforcing a code of conduct on governance, responsible lending, and customer protection
• Monitoring and surveillance of NBFCs under its purview
• Setting up a grievance redressal and dispute resolution mechanism
• Promoting financial literacy and staff training across member organisations
• Acting as an early warning system for emerging risks or sectoral stress
• FIDC will need to bring at least 10% of NBFCs under its membership within two years of recognition to retain its SRO status.

Important Takeaways

• Recognition Date: October 2025
• Organisation Recognised: Finance Industry Development Council (FIDC)
• Sector: NBFC (Non-Banking Financial Companies)
• Type: First SRO for NBFCs under RBI’s Omnibus Framework
• Key Functions: Code of conduct, compliance monitoring, dispute resolution, financial education, early warning
• Membership Target: ≥10% of NBFCs within 2 years