SEBI Floats Discussion Paper on Sandbox for Regulated Entities

Under the proposed framework, entities regulated by SEBI will be granted certain facilities and flexibilities to experiment with innovative solutions in a live environment and on real customers.

SEBI (the Securities and Exchange Board of India) has published a discussion paper on its regulatory sandbox for financial firms with a view to facilitate the development and adoption of innovative fintech solutions.

The regulator put out the discussion paper weeks after it released its sandbox framework for capital markets innovation. The RBI (Reserve Bank of India) has similarly also released its own sandbox framework for banking and payment services.

According to SEBI, the term ‘regulatory sandbox’ pertains to a live, testing environment where new products, processes, services, and business models can be deployed on a limited set of eligible customers for a specified period of time with certain relaxations.

Under the proposed sandbox framework, therefore, financial institutions regulated by SEBI shall be granted certain facilities and flexibilities to experiment with fintech solutions in a live environment and on real customers.

These features will be fortified with necessary safeguards for investor protection and risk mitigation, the regulator said.

“The sandbox is intended to serve as a testing ground for new business models and technologies that benefit the investors, Indian markets and the Indian economy at large,” the paper says.

SEBI is encouraging the submission of any general comments on the proposals, including suggestions for additional information, or clarification of any particular areas of the framework, and any alternative proposals that it should consider.

Among the issues on which SEBI is keen for comments are the charging of fees and the frequency for submission of interim reports.

It also seeks input on how to determine the duration of the cooling-off period for rejected applications.

The discussion paper is available here.

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