The inter-regulatory technical group on fintech (IRTG on FinTech) has unveiled a Standard Operating Procedure (SOP) for inter-operable regulatory sandbox (IoRS) to facilitate testing of innovative products/services falling within the regulatory ambit of more than one financial sector regulator.
On tap basis
The application for IoRS will be ‘on tap basis’. The applications from Indian fintechs having global ambition and foreign fintechs seeking entry to India shall be referred to International Financial Services Centres Authority (IFSCA), for taking forward the proposals, as it will be the PR for all such applications.
The regulatory sandbox framework of the regulator under whose remit the ‘dominant feature’ of the product falls, will govern it as ‘principal regulator (PR)’. The regulator/s under whose remit the other features apart from the dominant feature of the product fall will be the ‘Associate Regulator (AR)’, according to the SOP released by RBI.
One of the mandates of the IRTG on fintech, which had been constituted under the aegis of the Financial Stability and Development Council - Sub Committee, was to suggest models on IoRS mechanism for hybrid products/services falling within the remit of more than one regulator as also to facilitate framing the SOP for the same.
Common window
According to RBI, a common window has been made available to obviate the need of innovators and to engage with different regulators regarding their hybrid product.
The central bank’s fintech department will act as a nodal point for receiving applications under IoRS and will be designated as the ‘Coordination Group.’
Factors considered
Two sets of factors would be considered for deciding the dominant feature. First, the type of enhancement to the existing products like loans, deposits, capital market instruments, insurance, G-secs, pension products, etc., and secondly, the number of relaxations sought by the entity for undertaking the test under the IoRS.
The dominant feature shall be decided with greater weightage to the number of relaxations sought. Based on this, the eligibility and networth criteria as applicable for the regulatory sandbox of the concerned regulator shall be applicable to the applicant entity for participation in the IoRS.
Post successful exit from, the entity shall approach PR and AR(s), for authorisation and for seeking regulatory dispensation before launching the product in the market.