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Inter-operable Regulatory Sandbox_ Standard Operating Procedure

IRDAI has placed a Press Release on its website with regard to Standard Operating Procedure for Inter-operable Regulatory Sandbox (IoRS) dated October 12, 2022.

Background:

The Inter-Regulatory Technical Group on FinTech (IRTG on FinTech) has been constituted under the aegis of Sub-Committee of the Financial Stability and Development Council (FSDC-SC) for inter-regulatory co-ordination among the financial sector regulators on FinTech-related issues including Inter-operable Regulatory Sandbox (IoRS). The group has issued a standard operating procedure (SOP) on interoperable regulatory sandbox (IoRS) to facilitate testing of innovative products/services falling within the regulatory ambit of more than one financial regulators viz. RBI, SEBI, IRDAI, IFSCA and PFRDA.

Key features of the Governance structure as stipulated in SOP are as follows:-

  • FinTech Department of RBI shall act as nodal point for receiving applications under IoRS and shall be designated as ‘Coordination Group (CG)’ for IoRS.
  • The application for IoRS shall be on ‘on tap basis’ in a prescribed application form.
  • The RS framework of the regulator under whose remit the ‘dominant feature’ of the product falls, shall govern it as ‘Principal Regulator (PR)’ .
  • The regulator/s under whose remit the other features fall shall be the ‘Associate Regulator (AR)’
  • The dominant feature will be decided with greater weightage to the number of relaxations sought.
  • The relaxation, if warranted, will be considered by PR/AR on a case-to-case basis and a decision to that effect will be binding and final.
  • The eligibility and net worth criteria would be dependent upon the dominant features of the product for necessary participation in the IoRS by applicant.
  • The initial scrutiny of the product or the service will be done by the coordination group while detailed examination will be done by the principal regulator based on its framework , the latter will have the final say in admitting a product or service in the sandbox and other regulators will provide their inputs in 30 days.
  • The test design will be finalised by the PR in consultation with other regulators , t he fin-tech selected for the sandbox will seek permission of the PR for relaxations before launching the product.
  • In cases where SEBI is involved, a fin-tech applicant not registered with the market regulator will have to partner with SEBI registered entity under its norms. Separately, International Financial Services Centers Authority (IFSCA) will be the principal regulator in cases where Indian fin-tech is looking to launch products abroad or foreign fintechs planning to initiate products in India.
  • Any coordination issue between PR and AR to reach common views on the regulatory treatment of innovative products, services and business models shall be discussed and sorted out in the IRTG on fin-tech before initiation of the live testing under IoRS. The IRTG on fin-tech in its subsequent meetings shall monitor the progress of the products being tested under IoRS.
  • After successful exit from IoRS, the entity will have to approach PR and AR(s), for authorisation and for seeking regulatory dispensation before launching the product in the market. The decision of the respective regulator would be binding on the entity.
  • The product being admitted and successfully exiting the IoRS will be published by the regulator concerned through press release, specifically indicating that it is under IoRS of IRTG on fin-tech..

Source category: IRDAI

Attachments

  • /2022/92_2022-10-12_Inter-operable_Regulatory_Sandbox__Standard_Operating_Procedure_(1).pdf
  • /2022/92_2022-10-12_Inter-operable_Regulatory_Sandbox__Standard_Operating_Procedure_(2).pdf
  • /2022/92_2022-10-12_Inter-operable_Regulatory_Sandbox__Standard_Operating_Procedure_(3).PDF

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