In a move to promote technological innovations aimed at financial inclusion, the Reserve Bank of India (RBI) had proposed to set up regulatory sandboxes where start-ups could test new products, services or business models with customers in a live environment, subject to certain safeguards and oversight. On August 13, 2019, the central bank released the final Enabling Framework for Regulatory Sandbox after a wide-ranging consultative process with stakeholders.
Last year, in December, the Reserve Bank announced the opening of first cohort under the Regulatory Sandbox (RS) with ‘Retail Payments’, as its theme.
On 16 December 2020, the Central Bank announced the opening of second cohort under the RS with ‘Cross Border Payments,’ as its theme.
“India is the largest recipient of inbound remittances across the globe accounting for 15% of global share; in the year 2019, India received $83 bn and in the first half year of 2020, has received $27.4 bn. Further, the daily average turnover of OTC foreign exchange instruments in India is approximately $40 bn. The Cohort is expected to spur innovations capable of recasting the cross-border payments landscape by leveraging new technologies to meet the needs of a low cost, secure, convenient and transparent system in a faster manner,” said RBI in a statement.
The Reserve Bank has also announced the theme of the third cohort- ‘MSME Lending’, details of which will be announced in due course.
RBI had set up an inter-regulatory working group in July 2016 to look into and report on the granular aspects of fintech and to review the regulatory framework and respond to the dynamics of the rapidly evolving fintech scenario. The expert panel headed by Sudarshan Sen, Executive Director, RBI released its report on 8 February 2018 for public comments. One of the key recommendations of the working group was to introduce an appropriate framework for a regulatory sandbox.
Salient features of the cohort:
- Entities meeting the eligibility criteria (as laid out in the updated framework published today, i.e., on December 16, 2020) and having product technologically ready for testing in the RS and / or deployment in the broader market, as per the theme of the Cohort, may apply.
- To encourage innovation and broad base the eligibility criteria, the enabling framework has been modified by reducing net worth requirement from the existing ₹25 lakh to ₹10 lakh, as also including Partnership firms and Limited Liability Partnership (LLPs) to participate in the RS.
- The window for submission of applications for the Cohort shall be open from December 21, 2020 to February 15, 2021. A scanned copy of the application, together with enclosures (maximum size 10 MB), may be forwarded through email.
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