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RBI proposes to allow fintech start-ups to test regulatory sandbox

Press Trust of India  |  Mumbai 

The of India Thursday proposed that could set up regulatory sandbox or live-testing of innovative products and services in segments such as retail payments, transfer, and data in the financial sector.

A regulatory sandbox (RS) usually refers to live-testing of new products or services in a controlled and test regulatory environment for which regulators may or may not permit certain regulatory relaxations for the limited purpose of the testing.

A working group set up by the RBI had recommended introduction of an appropriate framework for an RS within a well-defined space and duration where the financial sector regulator will provide the requisite regulatory guidance to increase efficiency, manage risks and create new opportunities for consumers.

In line with the recommendation, the central has released draft 'Enabling Framework for Regulatory Sandbox'.

"The proposed financial service to be launched under the RS 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," the draft said.

According to the draft, the target applicants for entry to the RS are (fintech) firms which meet the eligibility conditions prescribed for start-ups by the government.

The innovative products and services which could be considered for testing under RS include retail payments, transfer services, marketplace lending, digital KYC and

Innovation in wealth management services, digital identification services, smart contracts, and could also be tested.

Innovative technologies that could be brought under RS include (payments, digital identity), data analytics, application programme interface, applications under and and applications.

Highlighting the benefits of RS, the draft said the first and foremost is that it fosters "learning by doing".

Also, users of an RS can test the product's viability without the need for a larger and more expensive roll-out. If the product appears to have the potential to be successful, the product might then be authorised and brought to the broader market more quickly.

On risks and limitations of RS, the draft said the RBI or its RS cannot provide any legal waivers. Also, post-sandbox testing, a successful experimenter may still require regulatory approvals before the product, services or technology can be permitted for wider application.

The central has invited stakeholders' comments on the draft by May 8.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, April 18 2019. 20:00 IST
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