RBI’s Second Cohort under Regulatory Sandbox

The Reserve Bank of India recently announced the second cohort under Regulatory Sandbox. It was announced under the theme of “Cross Border Payments”.

What is Regulatory Sandbox?

The Regulatory Sandbox refers to live testing of new products and services in a controlled environment. The companies can test their product viability without the need for a larger and more expensive rollout with the help of Regulatory Sandbox. It provides first and empirical evidence on the benefits and risks of emerging Technologies and their implications.

Money Transfer services, cybersecurity, financial inclusion and digital Know-Your Customers have been included. Other products such as crypto currency, credit registry and credit information have been excluded.

First Cohort under Regulatory Sandbox

The first cohort under Regulatory Sandbox included companies in the retail payment space. It included feature phones, contactless payments and offline payments. This was released in 2019. The theme of first cohort was “Retail Payments”. In November 2020, RBI announced that it has received application from 32 entities for the first cohort. Of these six were selected for the test phase. And two entities have already started testing their products on the Sandbox.

The companies are going live through the Regulatory Sandbox and are not liable to legal waivers. They are held responsible for consumer losses incurred during the testing period. In November 2019, the Sadagopan Committee was set up to evaluate the applications filed under Regulatory Sandbox.

Second Cohort under Regulatory Sandbox

In the second cohort under Regulatory Sandbox, the Reserve Bank of India has reduced the minimum net worth requirement to use the facility from 25 lakhs of rupees to 10 lakh rupees. The apex bank has also allowed partnership firms and Limited Liability Partnerships to participate in the sandbox. The second cohort has been released under the theme “Cross Border Payments”.

Third Cohort under Regulatory Sandbox

The third cohort under Regulatory Sandbox is yet to be announced. The third cohort of sandbox will focus on Micro Small Medium Enterprises lending solutions. It is to be introduced under the theme “MSME Lending”.

Why does the cohort focus on Cross Border Payments?

India is the largest recipient of remittances. The Indian remittances account to 15% of global remittances. In 2019, India received 83 billion USD of remittances.

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