RBI Publishes Enabling Framework for Regulatory Sandbox

A regulatory sandbox 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 testing. The regulatory sandbox allows regulator, innovators, financial service providers (as potential deployers of the technology), and customers (as final users) to conduct field tests to collect evidence on the benefits and risks of new financial innovations, while carefully monitoring and containing their risks. The regulatory sandbox is potentially an important tool, which enables more dynamic, evidence-based regulatory environments that learn from, and evolve with, emerging technologies. The proposed financial service to be launched under the regulatory sandbox should include new or emerging technology, or use of existing technology in an innovative way, and should address a problem, or bring benefits to consumers.

RBI had set up an inter-regulatory Working Group in July 2016 to look into and report on the granular aspects of fintech and its implications, with the aim to review the regulatory framework and respond to the dynamics of the rapidly evolving fintech scenario. The report of the Working Group was released on February 08, 2018 for public comments. One of the key recommendations of the Working Group was to introduce an appropriate framework for a regulatory sandbox within a well-defined space and the duration for which the financial sector regulator will provide the requisite regulatory guidance, to increase efficiency, manage risks, and create new opportunities for consumers. Accordingly, RBI has released this proposed framework for regulatory sandbox.

Comment Due Date: May 08, 2019

Keywords: Asia Pacific, India, Banking, Insurance, Securities, Regulatory Sandbox, Fintech, Technology, Regtech, RBI