- The Reserve Bank of India (RBI) on August 13, 2019 issued the final framework for regulatory sandbox in order to enable innovations in the financial technology space.
- With this launch, RBI will join the league of other central banks in the world that have set up regulatory sandbox to encourage the development of new technological applications in banking. Now Fintech companies can explore areas like retail payments, money transfer, digital Know Your Customer (KYC), smart contracts, financial inclusion and cybersecurity among others.
- According to the proposed FinTech solution should highlight an existing gap in the financial ecosystem and the proposal should demonstrate how it would address the problem, and bring benefits to consumers or the industry and/or perform the same work more efficiently.
- RBI will launch the sandbox for entities that meet the criteria of minimum net worth of ₹25 lakh as per their latest audited balance sheet.
- The entity should either be a company incorporated and registered in the country or banks licensed to operate in India.
- While money transfer services, digital know-your customer, financial inclusion and cybersecurity products are included, crypto currency, credit registry and credit information have been left out.
What is 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 permit certain regulatory relaxations for the limited purpose of the testing.
- RBI said the objective of the sandbox was to foster responsible innovation in financial services, promote efficiency and bring benefit to consumers.
