Regulators in this sphere need to be flexible, writes Sanhita Katyal
The triad of financial regulators in India – the Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority of India (IRDAI) – proposed a sandbox framework in 2019, which the RBI and IRDAI introduced this year.
A regulatory sandbox allows live, time-bound testing of innovations under a regulator’s aegis, akin to a “proof of concept”, and of products that may not conform to regulations under the supervision of the regulator, thus permitting usage of a sandbox to test a product without a large, expensive launch. The first regulatory sandbox was rolled out in 2015 in the UK, and many jurisdictions like Hong Kong, Singapore, Canada and Australia followed with this concept.
In order to espouse innovation in insurance products and services, and provide a contained testing space to experiment with fintech solutions, the IRDAI constituted a regulatory sandbox committee last year to glean requirements from industry participants and identify a mechanism for filling up regulatory voids to meet such requirements.
The committee submitted its report in February this year, recommending that the IRDAI encourage innovation by providing a sandbox environment. Subsequently, the IRDAI notified the Sandbox Regulations, 2019, in July, and proclaimed the implementation guidelines in August this year.
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