Inter-operable Regulatory Sandbox

Inter-operable Regulatory Sandbox

Subject : Economy

Context:

The Inter-Regulatory Technical Group on FinTech (IRTG on FinTech) has put in place a common window under the system of Inter-operable Regulatory Sandbox (IoRS).

Concept:

• IRTG has been constituted under the aegis of the Sub-Committee of the Financial Stability and Development Council (FSDC-SC) for inter-regulatory coordination among the financial sector regulators on FinTech-related issues including IoRS.
• Financial products and service providers whose business models, activities and features fall within the remit of more than one financial sector regulator, will be considered for the testing under IoRS. 
• The framework of the regulator under whose remit the ‘dominant feature’ of the product falls, will govern it as ‘Principal Regulator (PR)’. 
• The regulator under whose remit the other features apart from the dominant feature of the product fall will be the ‘Associate Regulator (AR)’
• The FinTech Department of RBI-nodal point for receiving applications under IoRS and will be designated as ‘Coordination Group (CG)’ for IoRS.
  • It will conduct preliminary scrutiny of the application and forward the same to the concerned PR and AR(s) under whose purview the innovation falls.
  • Detailed scrutiny of the application will be done by the PR based on its own framework.
  • The PR will coordinate with AR(s), regarding the features of the product, which falls under their remit.

Various Financial Sector Regulators:

• Securities and Exchange Board of India
• Reserve Bank of India
• Ministry of Finance
• Ministry of Corporate Affairs
• Insurance Regulatory Authority of India
• PFRDA-Pension Fund Regulatory & Development Authority

Regulatory sandbox (RS)

• It refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may permit certain relaxations for the limited purpose of the testing.
• The regulatory sandbox allows the regulator, innovators, financial service providers and customers to conduct field tests to collect evidence on the benefits and risks of new products and systems.