At
25th 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”
Quote
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.
Unquote
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.
