Sebi issues standard operating procedure for inter-operable regulatory sandbox

Sebi on Wednesday came out with a standard operating procedure for inter-operable regulatory sandbox in a bid to facilitate testing of innovative products falling within the regulatory ambit of more than one financial sector regulators. Financial products or service providers whose business models fall within the remit of more than one financial sector regulator such as Reserve Bank of India (RBI), Sebi, IRDAI (Insurance Regulatory and Development Authority of India), PFRDA (Pension Fund Regulatory & Development Authority) and IFSCA (International Financial Services Centres Authority) will be considered for the testing under Inter-operable Regulatory Sandbox (IoRS).

"To obviate the need of innovators, to engage with different regulators regarding their hybrid product, a common window has been made available," the Securities and Exchange Board of India (Sebi) said in a press release. IoRS has been prepared by the Inter-Regulatory Technical Group (IRTG) on FinTech. The group was constituted under the aegis of the Financial Stability and Development Council-Sub Committee (FSDC-SC). IoRS has been prepared by the Inter-Regulatory Technical Group (IRTG) on FinTech.

The group, in addition to the members from financial sector regulators, has representation from the Department of Economic Affairs, Ministry of Finance and Ministry of Electronics and Information Technology. Under the procedure, the FinTech Department of RBI will act as nodal point for receiving applications under IoRS and will be designated as Coordination Group for IoRS. All the necessary secretarial support will be provided by them. The application of IoRS will be on 'on tap basis' in a prescribed application form. Under the procedure, the FinTech Department of RBI will act as nodal point for receiving applications under IoRS and will be designated as Coordination Group for IoRS. All the necessary secretarial support will be provided by them.

The regulatory sandbox (RS) framework of the regulator, under whose remit the 'dominant feature' of the product falls, governs 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)'. Two sets of factors would be considered for deciding the dominant feature. Firstly, the type of enhancement to the existing products like loans, deposits, capital market instruments, insurance, G-sec instruments, pension products, etc., and secondly, the number of relaxations sought by the entity for undertaking the test under the IoRS. Two sets of factors would be considered for deciding the dominant feature.