The Reserve Bank of India (RBI) has asked financial technology (fintech) companies to create a self-regulatory organisation (SRO) that will ensure statutory and regulatory compliance.

The RBI, in a draft framework released on Monday, said the self-regulatory body should work towards strengthening governance standards and addressing the sector's needs and challenges.

The draft framework comes at a time when the fintech industry is growing at a frenetic pace due to surging demand for digital payments and borrowings. 

In September, RBI Governor Shaktikanta Das had urged fintech firms to create such a self-regulatory body.  

"Achieving a healthy balance between facilitating innovation by the industry on the one hand, and meeting regulatory priorities in a manner that protects consumers and contains risk, on the other, is crucial to optimising the contribution of the FinTech sector," the RBI said.  

Self-regulation within the fintech sector is a preferred approach for achieving the desired balance, it added.  

According to the draft norms, the SRO would ensure adherence to industry standards and facilitate a transparent communication channel with the RBI.  

The organisation is also expected to consult the RBI in developing and updating the taxonomy for fintechs, to carry out any tasks assigned to it, and to supply information as directed by the central bank.

The RBI can inspect the books of the fintech self-regulatory body or arrange to have the books audited.  

The SRO's board should put in place a framework for the ongoing monitoring of 'fit and proper' status of its directors.  

The RBI has invited feedback on the draft framework by February-end. The final framework will be issued after that.