RBI Update: Revisions to the Regulatory Sandbox Framework

04 Mar 2024
  • DMD Advocates
  • Blog

The Reserve Bank of India (RBI) has placed the revised ‘Enabling Framework for Regulatory Sandbox’ on February 28, 2024. This framework provides for regulatory relaxations, elaborates on key design aspects, outlines the various stages of the Regulatory Sandbox process, and discusses guiding principles, benefits, as well as the risks and limitations of the Regulatory Sandbox.

RBI aims to foster responsible innovation in financial services, promote efficiency, and bring benefit to consumers, via the framework. Following are the key takeaways from the revised framework:

I. Eligibility Criteria for Regulatory Sandbox: The target applicants for entry to the Regulatory Sandbox, are FinTech companies including start-ups, banks, financial institutions, any other company, limited liability partnership and partnership firms, partnering with or providing support to financial services businesses, subject to the Regulatory Sandbox criteria laid down in these guidelines.

II. Regulatory Requirements/Relaxations for Regulatory Sandbox Applicants: The RBI may consider some relaxations for the duration of Regulatory Sandbox on a case-to-case basis in terms of liquidity requirements, board composition, management experience, financial soundness, track record and statutory restrictions. However, there will be no concessions given in terms of customer privacy and data protection, secure storage of and access to payment data of stakeholders, local data storage, security of transactions, know your customer/anti-money laundering/counter finance terrorism compliance, and statutory requirements.

III. Stages and Timelines in the Regulatory Sandbox process: The process has been divided into five stages, to be completed within nine months, as explained below.

• Preliminary screening phase may last ordinarily for one month from the submission of complete application form by the applicant. It is pertinent to note that this period is outside the overall Regulatory Sandbox cohort timeline of nine months.
• Application assessment and shortlisting stage may last for up to one and a half month.
• Formulation of test design and integration phase may last for one and a half month.
• Testing phase may last for a maximum of five months.
• Evaluation phase may last for one month.

To access the revised framework, click here.

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