On August 13, 2019, The Reserve Bank of India (RBI) issued the final draft ‘enabling framework for regulatory sandbox (RS)’, for the startups, banks and financial institutions aims at enabling innovations in the financial technology space. The Fintech entities can now set up their own RS for live testing of innovative products in the areas of retail payments, digital KYC(Know your customer) and wealth management.
i. objective: The framework promotes innovation in financial services, creates efficiency and bring benefit to consumers. It will encourage innovations that are intended for use in the Indian market in areas where there is absence of governing regulations.
ii. Criteria: RBI will launch the sandbox for companies/banks that meet the criteria of the minimum net worth of Rs.25 lakh and the promoter/director of the entity should meet fit and proper framework.
iii. Regulatory Sandbox (RS): It refers to live testing of new products/services in a secure &controlled regulatory environment, where the regulators can allow certain regulatory relaxations for the limited purpose of the testing.
iv. Permission: Mobile technology applications, data analytics, application program interface (APIs) services, applications under block chain technologies, and artificial intelligence (AI)and machine learning(ML) applications can be used for testing under RS.
v. Evidence: It also permits the innovators, regulators, financial providers, and the customers to carry out field tests so that they can verify the benefits and risks of new emerging financial innovations and their implications.
vi. Benefits: RS users can test the product’s viability without the need for a larger and cost-effective launch.
vii. Risks: Innovators may lose some flexibility and time in going through the sandbox process. This can be reduced with the time-bound running manner.
viii. Background: The concept of Regulatory Sandbox was proposed by a committee headed by Sudarshan Sen, former executive director of RBI.
♦ Headquarters: Mumbai
♦ Governor: Shaktikanta Das
♦ Deputy Governors: 4 (BP Kanungo, Mahesh Kumar Jain, N S Vishwanathan & the 4th is yet to be appointed).