The market watchdog Securities and Exchange Board (SEBI) floated a discussion paper on regulatory sandbox for financial companies where relaxations would be offered on developing new services, products, processes, and business models.
As per SEBI, ‘regulatory sandbox’ is a live environment which allows processes and products to be deployed over a certain period on eligible customers with some exemptions.
The main intention of the sandbox environment is to bring innovation and technologically-intense products under the purview of SEBI. This helps in finding out drawbacks.
SEBI had proposed “innovation sandbox” framework to enable the growth and implementation of innovative fintech solutions. Under ‘innovation sandbox’, fintech companies that are not regulated by SEBI can test their business solutions.
The RBI regulated financial companies are granted some exemptions to work with fintech solutions in a real-time environment on real customers.
SEBI said that these features would be secured to protect the interest of investors and to mitigate risk. The market regulator further said that the discussion paper looks at suggesting ideas to implement such ‘regulatory sandbox’.
According to SEBI, the regulatory sandbox serves as a testing environment for the upcoming business models and helps investors, Indian markets, and economy in the long run.
SEBI has welcomed public feedback on the proposed regulatory sandbox. The modern world is tech-savvy and regulatory sandbox is expected to play a significant role in helping finance companies implement new technologies.