What is the IoRS (Interoperable Regulatory Sandbox) for which RBI recently released an SOP? What needs to be done to get the most out of this initiative?

RBI has released a standard operating procedure (SOP) for an Inter-operable Regulatory Sandbox (IoRS) to regulate newer FinTech products and services falling in the ambit of more than one regulator. It is prepared by the Inter-Regulatory Technical Group on FinTech under the Financial Stability and Development Council.

Interoperable Regulatory Sandbox:

• A regulatory sandbox is a framework set up by a regulator that allows FinTech startups and other innovators to conduct live experiments in a controlled environment with some regulatory relaxations for the limited purpose of the testing  under a regulator’s supervision.
• It will help to develop a clear jurisdiction in case of overlapping areas involving multiple regulators, including RBI, SEBI, IRDAI, PFRDA, etc.
• It allows FinTech to conduct limited-space field tests of the new product before a wider-scale launch.
• Regulators obtain first-hand empirical evidence on the benefits and risks of emerging technologies and their implications.

Way forward:

The initiative by the RBI will help the FinTech sector to continue its growth and better perform in the real-world situations.

Topics: GS-III: Indian Economy Issues Relating to Planning • GS-III: Economic Growth Development