The Reserve Bank of India (RBI) issued the final framework for regulatory sandbox (RS) for the startups, banks and financial institutions. The Fintech companies can now set up their own RS for live testing of innovative products in areas like retail payments, digital KYC and wealth management.
The framework aims to enable innovations in the financial technology space. It will also foster responsible innovation in financial services, promote efficiency and bring benefit to consumers. It will encourage innovations that are intended for use in the Indian market in areas where there is an absence of governing regulations.
Fintech companies including startups, banks, financial institutions and any other company partnering with or providing support to financial services businesses.
Mobile technology applications, data analytics, application program interface (APIs) services, applications under blockchain technologies, and artificial intelligence and machine learning applications can also be considered for testing under RS.
The sandbox entity should ensure that any existing obligations to the customers of the financial service under experimentation are fulfilled or addressed before exiting or discontinuing the RS.
A regulatory sandbox refers to live to test new products or services in a controlled/test regulatory environment. The regulators can permit certain regulatory relaxations for the limited purpose of the testing.