Why is it in the News?

The Reserve Bank recently tweaked guidelines for the Regulatory Sandbox (RS) scheme under which participating entities will have to comply with digital personal data protection norms.

About the Regulatory Sandbox Scheme:

• The Regulatory Sandbox scheme denotes a controlled regulatory environment where new products or services can undergo live testing.
• Functioning as a "safe space" for businesses, regulators may offer certain relaxations for testing purposes within this environment.
• It serves as a structured platform for regulators to engage with the industry and develop regulations that foster innovation and enable the delivery of cost-effective financial products.
• The scheme holds potential as a tool for creating dynamic regulatory environments that adapt to emerging technologies through evidence-based learning.

Objectives:

• Offering innovative technology-led entities an opportunity for limited-scale testing of new products or services, potentially involving regulatory relaxations before broader implementation.
• At its core, the Regulatory Sandbox is a formal program allowing market participants to test new products, services, or business models in live settings, under appropriate oversight.
• Proposed financial services under the scheme should leverage new or emerging technology to address consumer needs or offer benefits.
• The overarching goal is to promote responsible innovation in financial services, enhance efficiency, and deliver consumer benefits.
• The Reserve Bank of India (RBI) introduced the 'Enabling Framework for Regulatory Sandbox' in August 2019 after extensive consultations.
• The updated framework mandates compliance with the Digital Personal Data Protection Act of 2023 for sandbox entities.
• Furthermore, the timeline for various stages of the Regulatory Sandbox process has been extended from seven to nine months.
• Fintech companies, including startups, banks, financial institutions, and other entities providing support to financial services businesses, are among the target applicants for entry into the Regulatory Sandbox.