The Reserve Bank of India (RBI) on Wednesday announced a standard operating procedure (SOP) for interoperable regulatory sandbox to regulate newer fintech products and services falling in the ambit of more than one regulator. The move is aimed at developing a clear jurisdiction where there are overlapping areas involving multiple regulators, including the RBI, Securities and Exchange Board of India (Sebi), Insurance Regulatory and Development Authority (Irdai), Pension Fund Regulatory and Development Authority (PFRDA).
Under the framework, the dominant feature of the product will determine the influence of the regulator and the regulator under whose jurisdiction such feature will be the principal regulator and others will be associate regulators. The dominant feature will be determined based on the number of relaxations sought for the product and the type of the product.
The initial scrutiny of the product or the service will be done by the coordination group, which is the fintech department of the RBI while detailed examination will be done by the principal regulator based on its framework. The latter will have the final say in admitting a product or service in the sandbox and other regulators will provide their inputs in 30 days.
The test design will be finalised by the principal regulator in consultation with other regulators. The fintech selected for the sandbox will seek permission of the principal regulator for relaxations before launching the product.
In cases where Sebi is involved, a fintech applicant not registered with the markets regulator will have to partner with Sebi registered entity under its norms. Separately, International Financial Services Centres Authority (IFSCA) will be the principal regulator in cases where Indian fintech is looking to launch products abroad or foreign fintechs planning to initiate products in India.
The SOP is prepared by the inter-regulatory technical group on fintech, which is chaired by chief general manager of the RBI’s fintech department and representatives of Sebi, Irdai, IFSCA, PFRDA and the central government.
A month ago, the RBI launched its fifth cohort under the regulatory sandbox, without a specific theme and has invited applications for innovative products related to its regulatory domain. A regulatory sandbox is live testing of new products or services on a pilot basis with some relaxations for the limited purpose of the testing.