Inter-operable Regulatory Sandbox

  • October 13, 2022
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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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.
economy Inter-operable Regulatory Sandbox