The Pension Fund Regulatory and Development Authority (PFRDA) on October 12, 2022, issued a notification related to Inter-operable Regulatory Sandbox: Standard Operating Procedure, a Financial Stability, and Development Council-Sub Committee have established an Inter-Regulatory Technical Group on FinTech (IRTG on FinTech) (FSDC-SC). The terms of reference of the IRTG on FinTech include discussion on issues relating to hybrid products and services that fall under the regulatory purview of various financial sector regulators for admission in Regulatory Sandbox and framing of Standard Operating Procedure (SOP) for IoRS for hybrid products and services.
Along with representatives from the Financial Sector Regulators, the committee also includes members from the Department of Economic Affairs (DEA), Ministry of Finance, and Ministry of Electronics and Information Technology (MeITY), GoI, to facilitate the testing of novel products and services that fall under the regulatory purview of multiple financial sector regulators, including RBI, SEBI, IRDAI, IFSCA, and PFRDA (IRTG on FinTech).
The governing points to be considered are -
•FinTech Department of RBI shall act as a nodal point for receiving applications under loRS and shall be designated as a 'Coordination Group (CG)' for loRS. All the necessary secretarial support shall be provided by them.
•The application for loRS shall be on an 'on-tap basis' in a prescribed application form. The RS framework of the regulator under whose remit the 'dominant feature' of the product falls, shall govern it as 'Principal Regulator (PR)'. The regulator/s under whose remit the other features apart from the dominant feature of the product fall shall be the 'Associate Regulator (AR)'
•Two sets of factors would be considered or decide the dominant feature. Firstly, the type of enhancement to the existing products like loans, deposits, capital market instruments, insurance, G-sec instruments, pension products, etc., and secondly, the number of relaxations sought by the entity for undertaking the test under the loRS.
•Based on the dominant features of the product, the eligibility criteria, and networth criteria as applicable for the RS of the concerned regulator (PR) shall be applicable to the applicant entity for participation in the loRS.
•Based on the minimum eligibility criteria of the regulator under whose remit the dominant feature of the product falls, the Coordination Group (CG) (FinTech, RBI) shall conduct preliminary scrutiny of the application and forward the same to the concerned PR and AR(s) under whose purview the innovation falls.
•In order to keep the loRS process simple and non-disruptive, detailed scrutiny of the application shall be done by the PR based on its own framework. The PR shall coordinate with AR(s), regarding the features of the product, which falls under their remit concerned PR and AR(s) under whose purview the innovation falls.
•In order to keep the loRS process simple and non-disruptive, detailed scrutiny of the application shall be done by the PR based on its own framework. The PR shall coordinate with AR(s), regarding the features of the product, which falls under their remit.
•In case SEBI is the AR since the provisions of the SEBI Act allow only SEBI-registered entities to participate in their RS, the unregistered applicant may get into an MoU or any other arrangement with a SEBI-registered entity to participate in loRS.
•The applications from Indian FinTechs having global ambition and foreign FinTechs seeking entry to India, shall be referred to IFSCA, for taking forward the proposals, as IFSCA will be the PR for all such applications.
•The PR shall reserve the right of admissibility of the hybrid product/solution/innovation as per its RS framework and accordingly communicate to the applicant. The decision to that effect shall also be communicated to CG/IRTG on FinTech, for information.
•AR(s) shall provide specific inputs, and stipulate conditions regarding aspects falling under its remit for parameters to be tested, boundary conditions, risks to be monitored, etc. The AR(s) shall provide inputs at the earliest but not later than 30 days from receipt of a reference from the PR. The test design shall be finalized by the PR in consultation with the AR.
•The evaluation of the product shall be done as per the framework of the PR, which may also reflect appraisal by the AR(s) while deciding on the suitability and viability of the product/services.
An attachment contains the Common Application form (Inter-operable Regulatory Sandbox (IoRS) Application Form) attached to the document, for the IoRS. Entities that meet the minimal requirements for participation in the Principal Regulator's RS, may apply through email at [email protected] together with the necessary papers.
