Regulatory sandbox scheme

Regulatory sandbox scheme

Subject: Environment

Section: Pollution

Context:

HDFC Bank and Precision Biometric India have been selected by the Reserve Bank for testing their ‘on tap’ retail payments applications under the regulatory sandbox scheme

Details:

• The RBI announced the opening of the ‘On Tap’ application facility for the theme ‘Retail Payments’ under the regulatory sandbox in October last year.
• The product ‘Offline Retail Payments’ by HDFC Bank (in partnership with Crunchfish AB) provides the capability for customers and merchants to pay and receive payments in offline mode
• Precision Biometric India has come out with ‘InnaIT Key Solution for Banking’.
  • It offers a solution to enable biometric tokens, which can be used for secure password-less authentication and Additional Factor Authentication (AFA), instead of an OTP, for logging into internet/ mobile banking

Concept:

• Regulatory sandbox (RS) 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.
• RBI had come up with a Regulatory Sandbox with the objective to foster responsible innovation in financial services, promote efficiency and bring benefit to consumers.
• First Cohort: First Cohort under the Regulatory Sandbox was launched by RBI in December 2020, with the theme as ‘Retail Payments’. Six entities have completed the testing phase of the cohort.
• Second Cohort: Second Cohort under the Regulatory Sandbox was announced by RBI in December 2020 with the theme as ‘Cross Border Payments’. Eight entities have been selected for the ‘Test Phase’.
• Third Cohort: Third Cohort under the Regulatory Sandbox was announced by RBI under the Regulatory Sandbox (RS) as ‘MSME Lending’ theme.
• Fourth Cohort:The Reserve Bank of India (RBI) announced – ‘prevention and mitigati­on of financial frauds’ as the fourth cohort under the regulatory san­dbox structure-The focus would be on using technology to reduce the lag between the occurrence and detection of frauds, strengthening the fraud governance structure, and minimizing response time to frauds
• RBI further announced that the fifth cohort under the regulatory sandbox will be theme neutral.