RBI FinTech Regulatory Sandbox: The Sandbox Process, Stages, & Exit

The Sandbox Process & the Stages in a Regulatory Sandbox

First and foremost, it’s the FinTech Unit (FTU) at the Reserve Bank of India (RBI) that supervises the end-to-end Sandbox Process. This exercise also involves supervising the testing of the products and/or innovations proposed by FinTech entities.

The Sandbox Process: Stages & Timelines

For every cohort of the RS, these 5 stages & timelines are vital:

  1. Preliminary Screening: At this screening stage, the FTU verifies a clear understanding of the applicant in regards to the objectives and principles of the sandbox and also that the applicant complies with it. The duration of this phase is 4 weeks from the launch of the sandbox. Inside of this duration, the applications are entertained by the FTU and evaluated to shortlist the applicants satisfying the eligibility criteria.
  2. Test Design: Lasting for 3 weeks, at this stage, the FTU finalises the test design via an iterative engagement with the applicants so as to recognise outcome metrics for measuring and assessing evidences of risks and benefits.
  3. Application Assessment: Possibly lasting for 3 weeks, this phase sees the FTU appraise the test design. If necessary, the FTU also considers proposing regulatory alterations.
  4. Testing: At the most lasting for a duration of 12  weeks, this stage has the FTU prepare a database of empirical evidences to evaluate the tests based on a meticulous examination.
  5. Evaluation: Possibly lasting for 4 weeks, at the evaluation stage the final outcome of the testing of products / services / technology takes place, in consonance with the anticipated parameters. The FTU, after assessing the outcome reports on the test, will take a decision regarding the viability and acceptability of the product / service under the RS.

Exiting the Regulatory Sandbox

When the sandbox period culminates, the regulatory relaxations offered to the entities stand lapsed and the sandbox entity exits the RS. In case the sandbox entity needs an extension of the duration of the sandbox, it should apply to the RBI a minimum of 1 month in advance prior to the lapsing of the sandbox period and with genuine reasons to pitch the consideration of entertaining the extension application.

Whatever the RBI decides in regard to the application stands final. The sandbox testing can cease as and when the RBI observes and decides that the entity is failing to realise its intended objectives, after taking into consideration the latest test contexts, anticipated outcomes and the schedule agreed internally by the sandbox entity and the RBI. The RS could also cease to continue in case the entity fails to comprehensively comply with the concerned regulations and allied conditions coming in existence as long as the sandbox process continues. If the sandbox entity decides to exit from the RS all by itself (on its discretion) it can do so by intimating the RBI a week in advance.

It is the obligation of the sandbox entity to ensure that the current obligation to its customers of the financial service being experimented is completely addressed prior to exiting or ceasing the RS ecosystems’ operations.