RBI issues final norms for regulatory sandbox

RBI issues final norms for regulatory sandbox

The RBI issues final norms for regulatory sandbox taking into account inputs received after a consultation process that began in April.

The Reserve Bank of India (RBI) on Tuesday issued the final framework for regulatory sandbox in order to enable innovations in the financial technology space.

A regulatory sandbox usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may permit certain regulatory relaxations for the limited purpose of the testing.

RBI issues final norms for regulatory sandbox  usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may permit certain regulatory relaxations for the limited purpose of the testing.

‘FinTech should highlight existing gap’

• The target applicants for entry to the RS, are FinTech companies including startups, banks, financial institutions and any other company partnering with or providing support to financial services businesses, subject to the sandbox criteria laid down in these guidelines.
• Minimum net worth requirement for applicants relaxed to Rs 25 lakh from Rs 50 lakh earlier.
• Notice period for a fintech to exit the RS increased to one month from one week earlier.
• The entity should either be a company incorporated and registered in the country or banks licensed to operate in India.
• Sandbox entities shall be required to take liability or indemnity insurance of an adequate amount and period to safeguard the interest of the customers.
• An indicative negative list of products/services/technology which may not be accepted for testing is: Credit registry, Credit information, Crypto currency/Crypto assets services, Trading/investing/settling in crypto assets, Initial Coin Offerings, Chain marketing services etc.

Important Points:

RBI issues final norms for regulatory sandbox that the entity should either be a company incorporated and registered in the country or banks licensed to operate in India.

• Meaning: The Regulatory Sandbox (RS) usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may (or may not) permit certain regulatory relaxations for the limited purpose of the testing.
• Benefits of setting up of an RS:
  • Regulators obtain first-hand empirical evidence on the benefits and risks of emerging technologies and their implications.
  • Users of an RS can test the product’s viability without the need for a larger and more expensive roll-out
  • By providing a structured and institutionalized environment for evidence-based regulatory decision-making, the dependence of the regulator on industry/stakeholder consultations only is correspondingly reduced.
• Risks and Limitations:
  • Innovators may lose some flexibility and time in going through the sandbox process.
  • Post-sandbox testing, a successful experimenter may still require regulatory approvals before the product/services/technology can be permitted for wider application.
  • There is potential for some legal issues coming up, such as those relating to consumer losses in case of failed experimentation.

Image Credits: https://www.moneycontrol.com/news/business/rbi-sets-norms-to-build-regulatory-sandbox-for-innovation-in-fintech-4332901.html

Source: The Hindu