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Framework for recognition of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs)

Reserve Bank of India (RBI) had released the framework for recognition of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs).

What is the need of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs)?

Industry self-governance helps in industry-wide smooth operations and ecosystem development. RBI’s Payment and Settlement Systems Vision 2019-21 had, therefore, envisaged the setting up of an SRO for PSOs. Accordingly, the framework for recognition of SRO for PSOs was released in October 2020.

What shall be the role of SRO for PSOs?

  • An SRO is a non-governmental organisation that sets and enforces rules and standards relating to the conduct of member entities in the industry, with the aim of protecting the customer and promoting ethical and professional standards. 
  • The SRO is expected to resolve disputes among its members internally through mutually accepted processes to ensure that members operate in a disciplined environment and even accept penal actions by the SRO. 
  • An ideal SRO would function beyond the narrow self-interests of the industry and address larger concerns, such as protecting customers, furthering training and education and strive for development of members, the industry and the ecosystem as a whole. 
  • Regulations, standards, dispute resolution and enforcement by an SRO get legitimacy not just by mutual agreement of its members, but also by the efficiency with which self-regulation is perceived to be administered. Such regulations supplement, but do not replace, applicable laws or regulations.

What shall be the eligibility criteria of SRO for PSOs?

  • The SRO shall be set-up as a not-for-profit company under the Companies Act, 2013.
  • Only regulated payment system entities, viz, banks and non-bank PSOs can be members of an SRO.
  • RBI may, if it deems necessary, require that the appointment of important positions in the Board of Directors of the SRO be subject to its prior approval.
  • The SRO shall be financially viable to carry on the activities handled or assigned to it. The fee for membership of the SRO shall be reasonable and uniform across all members.
  • SRO shall continue to adhere to the criteria under which it has been recognised as an SRO at all times.

What shall be the criteria for the Board of SRO for PSOs?

  • The Board of Directors and management of SRO shall satisfy the fit and proper criteria on an ongoing basis. 
  • Any change in directorship or adverse development about any Director shall be immediately reported to RBI.
  • At least 1/3rd of members in the Board of Directors shall be independent and not associated with member institutions.

What shall be the function and responsibilities of SRO for PSOs?

  • SRO shall serve as the representative voice of its members in public discussions or in interactions with RBI or any other authorities or in any communication with other bodies.
  • SRO shall work towards establishing minimum benchmarks, ethical and behavioural standards and help instil professional and healthy market behaviour among its members. 
  • SRO shall work towards development of not only the entities it represents but also the payment industry as a whole.
  • SRO shall promptly inform RBI about any violation that comes to its notice, of the provisions of the Payments and Settlement Systems Act, 2007 or any other guidelines / regulations / directions issued by RBI.
  • SRO shall establish a uniform grievance redressal and dispute resolution framework across its members, including addressing inter-PSO issues.
  • SRO shall impart training to the staff of its members and others. It shall conduct awareness programmes for spreading awareness about safe payment transactions.
  • SRO shall conduct or promote research and development for creating a secure and safe payments ecosystem.
  • SRO shall carry out any work assigned to it by RBI and examine any proposals or suggestions referred to it by RBI.
  • SRO shall provide any information, including data, sought by RBI periodically or as requested.
  • SRO shall be invited for periodical interactions with RBI, and shall reasonably be expected to look at the larger picture of the segment / industry in offering its views / inputs / suggestions. The SRO shall strive to address concerns beyond the interest of its membership, viz. to protect customers, participants and other stakeholders in the ecosystem.
  • SRO shall play a constructive role in supplementing and complementing the present regulatory / supervisory arrangements.

How shall the application of SRO for PSOs be processed?

  • A group / association of payment system operators (banks as well as non-banks) shall apply to RBI seeking recognition as an SRO.
  • On finding the applicant suitable, RBI shall issue a “Letter of Recognition” as an SRO.

Which entity is recognised as SRO for PSOs?

‘Self-Regulated PSO Association (SRPA)’ has been recognised as an SRO for PSOs.


References

Reserve Bank of India. (2020, October 22). 'Framework for Recognition of a Self-Regulatory Organisation for Payment System Operators'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11986&Mode=0

Reserve Bank of India. (2025, November 11). 'Recognition of Self-Regulatory Organisation for Payment System Operators'. Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=61599


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