RBI to issue norms for regulatory sandbox for fintech sector in next 2 months
The Reserve Bank of India (RBI) will issue guidelines for a “regulatory sandbox” in the FinTech space in the next two months, RBI governor Shaktikanta Das said on Monday, stressing that FinTech has potential to alter India’s financial services landscape. A “sandbox” is a framework set up by a regulator that allows FinTech start-ups to conduct live experiments in a controlled environment under supervision.
As part of his efforts to broaden stakeholder consultation on key issues, Das said he would meet heads of payments banks later this week. As many as seven payments banks have started operations after the first set of licences were issued in 2015. He also paid a “courtesy” visit to finance minister Arun Jaitley on Monday, ahead of the first bi-monthly monetary policy review meet, scheduled for April 2-4.
“A ‘Regulatory Sandbox’ would benefit FinTech companies by way of reduced time to launch innovative products at a lower cost,” Das said at an event organised by NITI Aayog here. A recent global survey ranked India second in FinTech adoption, with an adoption rate of 52%.
As many as 1,218 FinTech firms are operating in India that have created a large number of jobs and have generated a healthy appetite for investment, Das said, citing reports.
“We have to strike a subtle balance between effectively utilising FinTech while minimising its systemic impacts.” Listing some challenges, the governor said risks for FinTech products may also arise from cross border legal and regulatory issues and that data confidentiality and customer protection also need to be focussed on.
Das pitched for facilitating “unimpeded” flow of investments to the FinTech sector to realise its potential. “It is imperative to create an ecosystem which promotes collaboration while carefully paying attention to the implications that it has for the macro economy,” he said.
In November 2017, the RBI’s working group on FinTech and digital banking had recommended that a regulatory sandbox/innovation hub be introduced within a well-defined space and duration to experiment with FinTech solutions, where the consequences of failure can be contained and reasons for failure analysed. The RBI has also appointed a five-member panel under Nandan Nilekani to further deepen digital payments and boost financial inclusion through FinTech.
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