Skip to main content

What are SOPs for Interoperable Regulatory Sandbox?

Reserve Bank of India (RBI) has issued Standard Operating Procedure (SOP) for Inter-operable Regulatory Sandbox (IoRS).

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.

What is Inter-operable Regulatory Sandbox (IoRS)?

Inter-operable Regulatory Sandbox (IoRS) is a mechanism to facilitate testing of innovative hybrid financial products / services falling within the regulatory ambit of more than one financial sector regulator. 

What is the basis of Standard Operating Procedure (SOP) for IoRS?

To facilitate testing of innovative products / services falling within the regulatory ambit of more than one financial sector regulators [viz. Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDAI), International Financial Services Centres Authority (IFSCA) and Pension Fund Regulatory and Development Authority (PFRDA)], a Standard Operating Procedure (SOP) for Inter-operable Regulatory Sandbox (IoRS) has been prepared by the Inter-Regulatory Technical Group on FinTech (IRTG on FinTech) constituted under the aegis of the Financial Stability and Development Council - Sub Committee (FSDC-SC).

The Group is chaired by Chief General Manager, FinTech Department, RBI with representation from other financial sector regulators, viz., SEBI, IRDAI, IFSCA and PFRDA and one representative each from Department of Economic Affairs (DEA), Ministry of Finance and Ministry of Electronics and Information Technology (MeITY), Government of India.

Who are the participants in IoRS?

The financial regulators that are members of the IRTG on FinTech have consented to participate in the IoRS arrangement under the aegis of IRTG on FinTech.

Which product / services are admitted in IoRS?

Financial products / service providers whose business models / activities / features fall within the remit of more than one financial sector regulator, are considered for the testing under IoRS.

What are the guidelines on Governance?

  • FinTech Department of RBI shall act as nodal point for receiving applications under IoRS and shall be designated as ‘Coordination Group (CG)’ for IoRS. 
  • The application for IoRS shall be on ‘on tap’ basis. 
  • The RS framework of the regulator under whose remit the ‘dominant feature’ of the product falls, shall govern it as ‘Principal Regulator (PR)’. The regulator under whose remit the other features apart from the dominant feature of the product fall shall be the ‘Associate Regulator (AR)’
  • Two sets of factors would be considered for deciding the dominant feature. Firstly, the type of enhancement to the existing products and secondly, the number of relaxations sought by the entity for undertaking the test under the IoRS. The dominant feature shall be decided with greater weightage to the number of relaxations sought. 
  • Based on the dominant features of the product, the eligibility criteria and networth criteria as applicable for the RS of the concerned regulator (PR) shall be applicable to the applicant entity for participation in the IoRS.
  • The PR shall reserve the right of admissibility of the hybrid product / solution / innovation as per its RS framework and accordingly communicate to the applicant. The decision to that effect shall also be communicated to CG / IRTG on FinTech, for information.
  • ARs shall provide specific inputs, stipulate condition regarding aspects falling under its remit for parameters to be tested, boundary condition, risks to be monitored, etc. within 30 days from receipt of reference from the PR.
  • The test design shall be finalised by the PR in consultation with the AR.
  • Any co-ordination issue between PR and AR to reach common views on the regulatory treatment of innovative products, services and business models shall be discussed and sorted out in the IRTG on FinTech before initiation of the live testing under IoRS. 
  • The evaluation of product shall be done as per the framework of the PR, which may also reflect appraisal by the ARs, while deciding on suitability and viability of the product / services.
  • Post successful exit from the IoRS, the entity shall approach PR and ARs, for authorisation and for seeking regulatory dispensation before launching the product in the market. 
  • The product being admitted and successfully exiting the IoRS shall be published by the regulator concerned vide Press Release, specifically indicating that, it is under IoRS of IRTG on FinTech.


References

Reserve Bank of India. (2022, October 12). 'Inter-operable Regulatory Sandbox: Standard Operating Procedure'. Retrieved from https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=4196

Reserve Bank of India. (2022, October 12). 'Standard Operating Procedure for Inter-operable Regulatory Sandbox'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=54528


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Report of the Committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector

Reserve Bank of India (RBI) has released the report of the committee to develop a framework for responsible and ethical enablement of artificial intelligence (FREE-AI) in the financial sector. Committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector In the financial sector, Artificial Intelligence (AI) has the potential to unlock new forms of customer engagement, enable alternate approaches to credit assessment, risk monitoring, fraud detection, and offer new supervisory tools. At the same time, increased adoption of AI could lead to new risks like bias and lack of explainability, as well as amplifying existing challenges to data protection, cybersecurity, among others. To encourage the responsible and ethical adoption of AI in the financial sector, the committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector (Chairperson: Dr. Pushpak B...
Post a Comment
Read more

Investments in Debt Instruments by Non-residents

Reserve Bank of India (RBI) has issued directions on investments in debt instruments by non-residents. What are the channels for investments in debt instruments by non-residents? General Route – for investment in Government securities and corporate debt securities by Foreign Portfolio Investors (FPIs) subject to specified investment limits and macro-prudential limits. Voluntary Retention Route (VRR) – for investments in Government securities and corporate debt securities, free of certain macro-prudential limits applicable to FPI investments in debt markets under the General Route, by FPIs that commit to remain invested for a stipulated retention period. Fully Accessible Route (FAR) – for investments by non-residents in certain specified categories of Central Government securities (‘specified securities’) without any restriction. Scheme for Trading and Settlement of Sovereign Green Bonds (SGrBs) issued by the Central Government by eligible foreign investors in the International Finan...
Post a Comment
Read more

Continuous Clearing and Settlement on Realisation in Cheque Truncation System (CTS)

Reserve Bank of India (RBI) has issued direction on continuous clearing and settlement on realisation in Cheque Truncation System (CTS). What is Cheque Truncation System (CTS)? Cheque Truncation System (CTS) involves halting the physical movement of the cheque and its replacement by images of the instrument and the corresponding data contained in the MICR line.  In CTS, 3 images are taken of each cheque – front Gray Scale, front Black & White and back Black & White. MICR (Magnetic Ink Character Recognition) is a 9-digit code printed at the bottom of cheques using magnetic ink – first 3 digits indicate City Code, middle 3 digits indicate Bank Code and the last 3 digits indicate Bank Branch Code. Only CTS-2010 standards compliant instruments can be presented for clearing through CTS. The presenting banks which truncates the cheques need to preserve the physical instruments for 10 years. From when will the continuous clearing and settlement on realisation in CTS be implemented...
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

Non-Fund Based Credit Facilities

Reserve Bank of India (RBI) has issued directions on non-fund based credit facilities. To whom shall the directions be applicable? The directions shall apply to the following Regulated Entities (REs) for all their Non-Fund Based (NFB) exposures such as guarantee, letter of credit, co-acceptance etc. Commercial Banks (including Regional Rural Banks and Local Area Banks) Primary (Urban) Co-operative Banks (UCBs) / State Co-operative Banks (StCBs) / Central Co-operative Banks (CCBs) All India Financial Institutions (AIFIs) Non-Banking Financial Companies (NBFCs) including Housing Finance Companies (HFCs) in Middle Layer and above, only for the issuance of Partial Credit Enhancement. The directions shall not apply to the derivative exposures of a RE. Which NFB facilities are permitted to be issued by RE? RE shall issue a NFB facility only on behalf of a customer having funded credit facility from the RE. However, this shall not be applicable in respect of – Derivative contracts entered int...
Post a Comment
Read more