Fintech - Sandbox Testing

What is The Regulatory Sandbox (RS)? 

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

The RS allows the regulator, the innovators, the financial service providers (as potential deployers of the technology) and the customers (as final users) to conduct field tests to collect evidence on the benefits and risks of new financial innovations, while carefully monitoring and containing their risks. 

It can also provide a structured avenue for the RBI to engage with the ecosystem and to develop innovation-enabling or innovation-responsive regulations that facilitate delivery of relevant, low-cost financial products. The RS is an important tool which enables more dynamic, evidence-based regulatory environments which learn from, and evolve with, emerging technologies.

The focus of the RS will be to encourage innovations intended for use in the Indian market in areas where:

📌 There is absence of governing regulations;

📌 There is a need to temporarily ease regulations for enabling the proposed innovation;

📌 The proposed innovation shows promise of easing/effecting delivery of financial services in a significant way.

Regulatory Sandbox: Eligibility Criteria

The target applicants for entry to the RS, are FinTech companies including startups, banks, financial institutions, any other company, Limited Liability Partnership (LLP) and partnership firms, partnering with or providing support to financial services businesses, subject to the sandbox criteria laid down in guidelines.

- List of Fintech Products/Services

📌 Retail payments

📌 Money transfer services

📌 Marketplace lending

📌 Digital KYC

📌 Financial advisory services

📌 Wealth management services

📌 Digital identification services

📌 Smart contracts

📌 Financial inclusion products

📌 Cyber security products

-  Financial Technologies

📌 Mobile technology applications (payments, digital identity, etc.)

📌 Data Analytics

📌 Application Program Interface (APIs) services

📌 Applications under block chain technologies

📌 Artificial Intelligence and Machine Learning applications

Exclusion from Sandbox Testing

The entities may not be suitable for the RS if the proposed financial service is similar to those that are already being offered in India unless the applicants can show that either a different technology is being gainfully applied or the same technology is being applied in a more efficient and effective manner.

An indicative negative list of products/services/technology which may not be accepted for testing is given below.

📌 Credit registry

📌 Credit information

📌 Crypto currency / Crypto assets services

📌 Trading/investing/settling in crypto assets

📌 Initial Coin Offerings, etc.

📌 Chain marketing services

📌 Any product/services which have been banned by the Reserve Bank of India or Government of India.

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