Skip to main content

What is Regulatory Sandbox (RS)?

To promote innovations in the financial technology (fintech), Reserve Bank of India (RBI) had introduced Regulatory Sandbox (RS).

What is Regulatory Sandbox (RS)?

Regulatory Sandbox (RS) refers to live testing of new products / services in controlled / test regulatory environment for which regulators may (or may not) permit certain regulatory relaxations for the limited purpose of testing.

The objective of RS is to foster responsible innovation in financial services, promote efficiency and bring benefit to consumers.

Which financial products / services can be tested under RS?

The proposed financial service to be launched under RS should be new / emerging technology or use of existing technology in innovative way and should address a problem and bring benefit to customers.

Who can apply under RS?

  • Fintech companies (including start-ups), banks, financial institutions, company, partnership firms, Limited Liability Partnerships (LLPs) can apply for entry to RS.
  • The entity shall have a minimum net worth of Rs.10 lakh as per its latest audited balance sheet.
  • The entity, whose application for participation is rejected under RS, will be eligible to apply again with same or similar product only after the completion of mandatory cooling period of 6 months.
  • The applications can be made under ‘On-tap’ facility.

What are recent updates in the framework for RS?

  • The timelines of the various stages of the RS process have been revised from 7 months to 9 months. 
  • The updated framework also requires sandbox entities to ensure compliance with provisions of the Digital Personal Data Protection Act, 2023.

What are the themes of cohorts in RS?

Cohort Themes Products / services to be included
1st Cohort Retail payment – Mobile payments including feature phone-based payment services
– Offline payment solutions
– Contactless payments
2nd Cohort Cross border payments

 
3rd Cohort MSME lending

 
4th Cohort Prevention and Mitigation of Financial Frauds Focus would be on using technology to –
– reduce the lag between the occurrence and detection of frauds
– strengthening the fraud governance structure
– minimizing response time to frauds
5th Cohort Theme neutral Innovative products / services / technologies cutting across various functions in RBI’s regulatory domain


References

Reserve Bank of India. (2019, August 13). 'Enabling Framework for Regulatory Sandbox (Updated on February 28, 2024)'. Retrieved from https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=1262

Reserve Bank of India. (2019, November 04). 'Reserve Bank announces the opening of first cohort under the Regulatory Sandbox'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=48550

Reserve Bank of India. (2020, December 16). 'Reserve Bank announces opening of Second Cohort under the Regulatory Sandbox'. Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=50814

Reserve Bank of India. (2021, October 08). 'Regulatory Sandbox – Announcement of Theme for Fourth Cohort and Review of Enabling Framework'. Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52371

Reserve Bank of India. (2022, September 05). 'Regulatory Sandbox – Fifth Cohort Announcement and Opening of ‘On Tap’ application for Second Cohort on ‘Cross Border Payments’'. Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=54315

Reserve Bank of India. (2024, February 28). 'Enabling Framework for Regulatory Sandbox'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=57406


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Highlights of RBI Annual Report 2023-24 – Chapter 7 to 12

Reserve Bank of India (RBI) has published its annual report for the financial year 2023-24. In a series of articles, we will go through the highlights of the report. This is the fifth and last article in the series.  Chapter 7 – Public Debt Management Ways And Means Advances (WMA) limit for the Government of India (GoI) for H1:2023-24 (April to September 2023) was fixed at ₹1,50,000 crore and for H2:2023-24 (October 2023 to March 2024) was fixed at ₹50,000 crore. RBI issued an ultra-long security of 50-year tenor aggregating ₹30,000 crore to cater to the growing needs of long-term institutional players. Issuance of Sovereign Green Bonds (SGrBs) for an aggregate amount of ₹20,000 crore included maiden issuance of 30-year (₹10,000 crore) SGrB in addition to 5-year (₹5,000 crore) and 10-year (₹5,000 crore) SGrBs. A new 3-year benchmark security was introduced as part of government market borrowing programme during H1:2023-24.  The basket of products offered through the ‘Retail ...
Post a Comment
Read more

Lending against Gold and Silver collateral

Reserve Bank of India (RBI) has issued directions on lending against the collateral of gold and silver. To whom are the directions applicable? The directions are applicable to the following regulated entities (REs) – Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks, but excluding Payments Banks). Primary (Urban) Co-operative Banks (UCBs) & Rural Co-operative Banks (RCBs), i.e., State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs). Non-Banking Financial Companies (NBFCs), including Housing Finance Companies (HFCs). Which loans are covered under the directions? The directions shall apply to all loans offered by an RE for the purpose of consumption or income generation (including farm credit) where eligible gold or silver collateral is accepted as a collateral security. What is eligible collateral? Eligible collateral means the collateral of jewellery, ornaments or coins made of gold or silver. A lender shall not grant any ad...
Post a Comment
Read more

Prior approvals from or intimations / reporting to RBI by NBFC-BL

Non-Banking Financial Companies (NBFCs) are required to obtain prior approvals from Reserve Bank of India (RBI) or intimate / report to RBI various events. This article lists out some of such important events where prior approvals or intimations / reporting is required for Base Layer NBFCs (NBFC-BL). Events requiring prior approval from RBI  Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 dated October 19, 2023 Para 30 – NBFCs shall prepare its balance sheet and profit and loss account as on March 31 every year. Whenever an NBFC intends to extend the date of its balance sheet as per provisions of the Companies Act, 2013, it shall take prior approval of RBI before approaching the Registrar of Companies for this purpose. Even in cases where RBI and the Registrar of Companies grant extension of time, the NBFC shall furnish to RBI a proforma balance sheet (unaudited) as on March 31 of the year and the statutory returns ...
Post a Comment
Read more

RBI’s Monetary Policy (June 06, 2025): In A Nutshell

The bi-monthly monetary policy of Reserve Bank of India (RBI) was announced on June 06, 2025. Here are some of the highlights of the monetary policy announcement. Rates   Change Rate Policy repo rate Reduced by 0.50% 5.50% Standing deposit facility (SDF) rate 5.25% Marginal standing facility (MSF) rate 5.75% Bank rate 5.75% Monetary policy stance Monetary policy stance was changed from ‘accommodative’ to ‘neutral’. Domestic Economy  The Indian economy presents a picture of strength, stability, and opportunity. The 5x3x3 matrix of fundamentals provides the necessary core strength to cushion the Indian economy against global spillovers and propel it to grow at a faster pace.  First, strength comes from the strong balance sheets of the 5 major sectors - corporates, banks, households, government, and the external sector.  Second, there is stability on all 3 fronts – price, financial, and political – providing policy and economic certainty.  Third, the Indian ec...
Post a Comment
Read more

What is KYC?

Be it opening a new bank account, applying for a new credit card, registering for new e-wallet, or any other account or facility involving financial matters, the application process is incomplete until KYC is done.  What is KYC? KYC or Know Your Customer is a process of customer identification and verification while opening an account or undertaking a financial transaction. Why is KYC process needed? To prevent money laundering To combat financing of terrorism What is verified under KYC? The banks / financial institutions collect the relevant documents from the customers to verify the following – Proof of identity Proof of address Which documents can be collected for KYC? As per RBI’s Master Direction - Know Your Customer (KYC) Direction, 2016 (Updated as on May 10, 2021), “Officially Valid Document” (OVD) means – Passport Driving licence Proof of possession of Aadhaar number Voter's Identity Card issued by the Election Commission of India Job card issued by NREGA duly signed by an...
Post a Comment
Read more