RBI issues final norms for regulatory box

GS-III: RBI issues final norms for regulatory box

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The Reserve Bank of India (RBI) has issued the final framework for the regulatory sandbox in order to enable innovations in financial technology.

Regulatory Sandbox

A regulatory sandbox usually refers to live testing of new products or services in a controlled regulatory environment for which regulators may permit certain regulatory relaxations for the limited purpose of the testing.
The objective of the sandbox is to foster responsible innovation in financial services, promote efficiency and bring benefit to consumers.
It provides a secure environment for fintech firms to experiment with products under the supervision of a regulator.
It is an infrastructure that helps fintech players live to test their products or solutions, before getting the necessary regulatory approvals for a mass launch, saving start-ups time and cost.
The concept of a regulatory sandbox or innovation hub for fintech firms was mooted by a committee headed by then RBI executive director Sudarshan Sen.
The panel submitted its report in Nov 2017 has called for a regulatory sandbox to help firms experiment with fintech solutions, where the consequences of failure can be contained and reasons for failure analysed.
If the product appears to have the potential to be successful, it might be authorised and brought to the broader market more quickly.

What are the new RBI norms?

RBI will launch the sandbox for entities that meet the criteria of a 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 a bank licensed to operate in India.
While money transfer services, digital know-your-customer, financial inclusion and cyber security products are included, cryptocurrency, credit registry and credit information have been left out.

Meeting norms on customer privacy, data protection, security and access to payment data, the security of transactions, KYC, and anti-money laundering will be mandatory.

Source: Indian Express

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