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RBI Invited Application for 2nd Test Phase of Regulatory Sandbox on Cross Border Payments

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RBI announces 2nd cohort under regulatory sandboxAfter the commencement of Test Phase of First Cohort under the Regulatory Sandbox (RS) by Reserve Bank of India (RBI) on November 17, 2020, click here to read, now the apex bank has announced the opening of the Second Cohort on the theme of “Cross Border Payments”.

  • The window for submission of applications by eligible entities for the Cohort will be open from December 21, 2020 to February 15, 2021.
  • The theme of the first cohort was “Retail Payments” while for third Cohort, the theme will be “MSME Lending”.
  • This program allows the collaboration of banks, fintech and technology companies to conduct real-time experimental projects under the supervision of the RBI team.

Measures taken by RBI to Encourage Applications:

–Reduced minimum net worth requirement from the existing Rs 25 lakh to Rs 10 lakh.

–Participation of Partnership firms and Limited Liability Partnership (LLPs) have also been allowed.

Reason behind choosing the Cross Border Payment theme of 2nd Cohort:

India is the largest recipient of inbound remittances across the globe: India’s inbound remittances accounts for 15% of global share. In 2019, India received $83 bn and in the first half year of 2020, has received $27.4 bn.

  • The daily average turnover of Over-the-counter (OTC) foreign exchange instruments in India is approximately $40 bn.

What is a Regulatory sandbox (RS)?

It usually refers to live testing of new products or services in a controlled regulatory environment for which regulators may (or may not) permit certain relaxations for the limited purpose of the testing.

  • The objective of the regulatory sandbox is to foster responsible innovation in financial services, promote efficiency and bring benefit to consumers.
  • It also allows the regulator, innovators, financial service providers and customers to conduct field tests regarding benefits and risks of new financial innovations.

Recent Related News:

i.In exercise of powers vested in it under sub section (1) of Section 35 A of the Banking Regulation Act, 1949 read with Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India (RBI) imposed restrictions on withdrawals from Jalna, Maharashtra-based Mantha Urban Cooperative Bank for six months from November 17, 2020.

ii.RBI in consultation with the Government of India (GoI) has fixed Rs 1,25,000 crore as the Ways and Means Advances (WMA) limit for the 2nd half of the financial year(FY) 2020-21, i.e., October 2020 to March 2021.

About Reserve Bank of India (RBI):

Headquarters– Mumbai, Maharashtra
Formation– 1 April 1935
Governor– Shaktikanta Das
Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, and M Rajeswar Rao)