What is need of regulatory sandbox of RBI?
Indian regulatory environment often considered reactionary that prohibits innovations. This is particularly problematic in era of rapid changes in technology and corresponding applications, particularly in FinTech. Example Bitcoin and peer to peer lending are facing crippling norms. RBI’s RS is prime example of proactive regulation. It can provide a structured avenue for the regulator 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.
What is The Regulatory Sandbox?
RS usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may 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 like BANKS) and the customers to conduct field tests to collect evidence on the benefits and risks of new financial innovations, while carefully monitoring and containing their risks.
What are benefits of RS?
What are drawbacks of RS?
Crypto currency, Credit registry, credit information, Initial Coin Offering (ICO) and chain marketing have been kept out of the sandbox. These are important areas for innovations that can transform Financial sector. Like Credit registry and information applications will be crucial for Banks to identify potential customers in increasingly risky credit market.
What is way forward?
Such RS can be designed for E-commerce, drones, online pharmacy, online taxi aggregators, and other new emerging technological innovations to promote innovation, entrepreneurship and usher Digital and innovation led economy.
What is cohort within RS?
Cohort is one unit within RS. Cohort is end-to-end sandbox process focusing on a particular theme. Cohort consists of a limited number of entities testing their products during a stipulated period. The RS shall be based on thematic cohorts focusing on financial inclusion, payments and lending, digital KYC, etc. The cohorts may run for varying time periods but should ordinarily be completed within six months.
For the first cohort, the theme of retail payments will be adopted to spur innovation in digital payments. RBI has called for applications for the following products/services under the above theme: