IFSCA introduces FinTech Regulatory Sandbox in India

By Edil Corneille

The International Financial Services Centres Authority (IFSCA) has introduced a framework for a Regulatory Sandbox with an objective to develop a FinTech hub at the IFSC located at GIFT City in Gandhinagar. IFSCA endeavours to encourage the promotion of financial technology (FinTech) initiatives in financial products and financial services across the spectrum of banking, insurance, securities, and fund management.

Under the Sandbox framework, entities operating in the capital market, banking, insurance, and financial services space shall be granted certain facilities and flexibilities to experiment with FinTech solutions in a live environment with a limited set of real customers for a limited time frame. These features shall be fortified with necessary safeguards for investor protection and risk mitigation. The Regulatory Sandbox shall operate within the IFSC located at GIFT City.

Regulated as well as unregulated entities operating as well as individuals and startups from India and FATF compliant jurisdictions, shall be eligible for participation in the Regulatory Sandbox. Entities desirous of participating in the sandbox to showcase their innovative FinTech solutions, concepts, and business models shall apply to IFSCA.

IFSCA shall assess the applications and extend suitable regulatory relaxations to commence limited purpose testing in the Sandbox.

As an additional step towards creating an innovation-centric ecosystem in the IFSC, IFSCA has proposed the creation of an Innovation Sandbox, which will be a testing environment where FinTech firms can test their solutions in isolation from the live market, based on market-related data made available by the Market Infrastructure Institutions (MIIs) operating in the IFSC. The Innovation Sandbox will be managed and facilitated by the MIIs operating within the IFSC.