The RBI on Tuesday permitted startups, banks and financial institutions to set up regulatory sandbox (RS) for live testing of innovative products in areas like retail payments, digital KYC and wealth management.
RS usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may (or may not) permit certain relaxations for the limited purpose of the testing. The RS allows the regulator, innovators, financial service providers and customers to conduct field tests to collect evidence on the benefits and risks of new financial innovations, while carefully monitoring and containing their risks.
Releasing the ‘enabling framework for regulatory sandbox’, the RBI said the RS fosters ‘learning by doing’ on all sides and regulators obtain first-hand empirical evidence on the benefits and risks of emerging technologies and their implications.
This will enable authorities to take a considered view on the regulatory changes or new regulations that may be needed to support useful innovation, while containing the attendant risks.