Recently, RBI governor Shaktikanta Das said the central bank will set up a regulatory sandbox, for which guidelines will be issued in two months. The aim is to have appropriate regulatory and supervisory frameworks to ensure an orderly development of fintech, to streamline their influence into the financial system, to protect customers and safeguard the interest of all stakeholders. RBI’S working group on fintech and digital banking suggested the introduction of a ‘regulatory sandbox or innovation hub’ within a well-defined space and duration to experiment with fintech solutions.
There are a number of sandbox models globally. “London and Singapore comes to be the closest. As for India, the sandbox model is for the regulator," said Vivek Belgavi, partner and leader, fintech at PWC India. “It means if I am a financial services company such as a fintech or a bank and I want to test out a product or process I can do it through this. Say I want to do digital onboarding and use video and other options to check the authentic instead of in-person verification. And I want to check with the regulator if this model will be acceptable then sandbox is the place where I will show this method," he said.
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Sandbox is an experiment space. It does two things— gives a sense to the regulator on where changes are required and wherever required, it can be implemented. “It is a place where an experiment can be done. The RBI’s purpose is regulation and sandbox can be expected to be used for it," said Belgavi. RBI is not the first to consider regulatory sandbox. The Insurance Regulatory and Development Authority of India (IRDAI) has also mulled letting firms test products as part of its sandbox approach to test digital and tech-based innovations before launching them in the market.