RBI revises timeline for completion of Regulatory Sandbox process

The Reserve Bank of India (RBI) on Wednesday revised the timeline for the completion of various stages of a Regulatory Sandbox (RS) to nine months from the previous seven. 

The updated framework for an RS also requires sandbox entities to ensure compliance with provisions of the Digital Personal Data Protection Act, 2023.

“The framework (for RS) has been revised based on the experience gained over the last four and half years in running four cohorts and feedback received from fintechs, banking partners and other stakeholders,” the central bank said in a release. 

A sandbox entity should ensure it has appropriate technical and organisational measures for the compliance of the provisions under the Digital Personal Data Protection Act, the banking regulator added. 

Entities should ensure safeguards to prevent breach of personal data. 

“The sandbox must process all the data in its possession or under its control with regard to RS testing, in accordance with the provisions of Digital Personal Data Protection Act, 2023,” RBI said in its revised framework for sandbox entities. 

An RS refers to live testing of new products or services in a controlled regulatory environment for which regulators may or may not permit certain regulatory relaxations for the limited purpose of testing.

It enables the regulator, financial service providers and customers to conduct field tests to collect evidence on benefits and risks of new financial innovations, while monitoring and containing their risks.

The different processes and stages involved in a RS includes a preliminary screening, the assessment of application and shortlisting, formulation of test design and integration phase, and a testing and evaluation phase. 

The target applicants for entry to the RS include fintechs, banks, and companies partnering with or providing support to financial services businesses, among others. 

The RS may run a few cohorts (end-to-end sandbox process), with a limited number of entities in each cohort testing their products during a stipulated period, according to the Enabling Framework for Regulatory Sandbox. 

The RS is based on different cohorts focusing on financial inclusion, payments, lending and digital Know Your Customer (KYC), among others.