RBI FinTech Regulatory Sandbox: Eligibility & Design Aspects


The Reserve Bank of India’s draft regulatory sandbox (RS) for FinTech companies–the “Enabling Framework for Regulatory Sandbox,”–got released in April 2019 to ease for FinTech firms assessing the market capacity and efficiency of their proposed innovative products and services under a (timed) relaxed regulatory compliances regime. The RS is intended to act as a forum for regulator, the innovators, the financial service providers (deploying the technology), and the customers (as intended beneficiaries) to test the practicalities of their respective interests surrounding the products and services.

Eligibility for FinTech Regulatory Sandbox Participation

The intended applicants (potential participants) for entering the RS are FinTech firms satisfying the eligibility conditions published for startups by the government. The core focus of the RS is set to be to promoting the following types of innovations: a). when no regulations are present to govern the conduct. b). a pressing requirement to temporarily relax regulations for facilitating the proposed innovation. c). the marketed innovation exhibits considerable potential of relaxing delivery of financial services to a greater extent.

The Design Aspects for FinTech Regulatory Sandbox

The essential design features considered by RBI for the RS include the following: The RS could consider different thematic cohorts (first-to-last sandbox process) having a limited number of entities in each cohort testing their products during a stipulated period.

The thematic cohorts are required to focus on the domains specifically geared towards financial inclusion, payments, lending, digital KYC, etc. The cohorts could continue for different time periods but generally continue to be culminated in 6 months.

An ideated enlistment of innovative products and services considered for testing under RS include: innovative products and services, viz. retail payments, marketplace lending, digital KYC, financial advisory services, wealth management services, digital identification services, smart contracts, money transfer services, cyber security products, and financial inclusion products.

The enlistments of innovative technologies considered for testing under RS include: mobile technology applications—payments, digital identity, etc., data analytics, application program interface or API services, applications under blockchain technologies, artificial intelligence and machine learning applications.


The regulatory relaxations for sandbox applicants include: In case seeming warranted, the RBI could ease, for the time being the RS is active, the regulatory compliances pertaining to privacy of the customer and data protection, secure storage of and access to stakeholder payment data, transactions’ security, KYC / AML / CFT compliances, and statutory limitations.


As for the exclusion from sandbox technology, it is noted that the entities that stand unsuitable for RS are the ones that propose financial services identical to those already on offer in the Indian market. The services can be sanctioned given that the innovators can prove that a novel technology is being deployed or the technology already deployed is being offered in an even more enhanced and proficient way.


The services that are omitted from the approved list of services include: credit registry and information, cryptocurrency/cryptoassets services, trading / investing / settling in crypto assets, Initial Coin Offerings (ICOs), and chain marketing services. The focused RS approach is poised to get operational with 10 to 12 competitively chosen entities based on a comprehensive selection process under the auspices of the framework of ‘Fit and Proper criteria for selection of participants in RS’.