The Reserve Bank of India has come out with a policy statement, permitting startups, banks and financial institutions to set up regulatory sandbox for live testing of innovative products in areas like retail payments, digital KYC and wealth management. The regulatory sandbox 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. The central bank released an ‘enabling framework for regulatory sandbox’, stating the sandbox 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, the RBI said. The RBI also mentioned that innovators may lose some flexibility and time in going through the sandbox process but running the sandbox in a time-bound manner at each stage can mitigate this risk.
