Reserve Bank of India to unveil Regulatory Sandbox in the next two months

          At 25^th March, 2019,  NITI Aayog’s FinTech Conclave’s Keynote Address Shri Shaktikanta Das, Governor, Reserve Bank of India, mentioned about the need for Regulatory Sandbox.

          The theme of the keynote address is “Opportunities and Challenges of FinTech”

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 The Reserve Bank’s working group on FinTech and digital banking (Report of the working group on FinTech and digital banking, November 2017) suggested the introduction of a 'regulatory sandbox/innovation hub' within a well-defined space and duration to experiment with FinTech solutions, where the consequences of failure can be contained and reasons for failure analysed. A ‘Regulatory Sandbox’ would benefit FinTech companies by way of reduced time to launch innovative products at a lower cost. Going forward, the Reserve Bank will set up a regulatory sandbox, for which guidelines will be issued in the next two months.

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          In simple terms, Sandbox is an isolated environment in which new approaches can be tested before releasing for Live use.

          Developers can run their test-cases in a controlled environment to observe the IT Applications behaviour and fine-tune for live use.

Sandbox is a special security feature which allows you to run potentially suspicious applications automatically in a completely isolated environment. Programs running within the sandbox have limited access to organisation files and system, so there is no risk to your computer or any of your other files.

Regulators in major financial markets have established regulatory ‘sandbox’ or testing environment for furthering financial technology and adoption

SEBI in mid-2017 set up a ‘Committee on Financial and Regulatory Technologies (CFRT)

One of the committee’s objective is to finalised the ‘Approach  and  framework  for  regulatory  sandbox  in  Indian  market  conditions  to  facilitate adoption of FinTech and promote financial innovations’.

IRDA in late 2018 set up a committee to frame guidelines on ‘Regulatory Sandbox’, in Insurance space in India. The committee has submitted its key recommendations to IRDA. IRDA in turn has sought feedback from general public before releasing the final guidelines.

The Insurance Regulatory Sandbox would have defined entry and eligibility criteria, boundary conditions, process flow, timelines and success factors / exit parameters for the applicants, along with appropriate controls for protection and risk management.

  

The above terms will be common to Finance Regulatory Sandbox and Stock Market Regulatory Sandbox.

The word ‘Regulatory Sandbox’, is also mentioned in ‘Report of the Working Group on FinTech and Digital Banking’, submitted to Reserve Bank of India in November 2017.

On of the committee’s key recommendations is:

In view of IDRBT’s unique positioning as a research and development institute, and as indicated by some of its activities, it is felt that IDRBT is well placed to create and maintain a regulatory sandbox in collaboration with RBI for enabling innovators to experiment with their banking/payments solutions for eventual adoption.

The Institute may continue to interact with RBI, banks, solution providers regarding testing of new products and services and over a period of time upgrade its infrastructure and skill sets to provide full-fledged regulatory sandbox environment. The Reserve Bank of India may actively engage with the Institute in this regard.