Business Economy

‘Norms soon for regulatory sandbox for fintech sector’

The Reserve Bank of India will, in the next two months, release the guidelines for the creation of a ‘regulatory sandbox’ for the fintech sector, RBI Governor Shaktikanta Das said on Monday.

A regulatory sandbox is a controlled mechanism within which the sector will be able to experiment with solutions in a closely-monitored ecosystem so that the risks do not spread outside it, and the reasons for failure can be analysed.

“The RBI’s working group on fintech and digital banking suggested the introduction of a ‘regulatory sandbox/innovation hub’ 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,” Mr. Das said while speaking at a NITI Aayog conference on the fintech sector.

‘Cuts time and cost’

“A regulatory sandbox would benefit fintech companies by way of reduced time to launch innovative products at a lower cost,” Mr. Das added.

“Going forward, the Reserve Bank of India will set up a regulatory sandbox, for which guidelines will be issued in the next two months.”

Regarding the fintech sector’s expansion, the Governor said that the two main areas that required attention were how to improve the accessibility of financial platforms using fintech, and analysis potential risks that may arise out of fintech adoption.

A strong risk culture, in which risk detection, assessment and mitigation are part of the daily job of bank staff, will be central to the success of managing the emerging risks,” Mr. Das said. “Similarly, systemic risks may arise from unsustainable credit growth, increased inter-connectedness, procyclicality, development of new activities beyond the supervisory framework and financial risks manifested by lower profitability.”

“Risks for fintech products may also arise from cross-border legal and regulatory issues,” he added. “Data confidentiality and customer protection are major areas that also need to be addressed.”

Source: thehindu.com

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