Insurance Regulatory and Development Authority of India (IRDAI) on Friday launched the Regulatory Sandbox system for innovative technology-led entities. The initiative was launched during the opening session of a workshop on Regulatory Sandbox organized by IRDAI in partnership with Confederation of Indian Industry. What is Regulatory Sandbox? (Static)
Source RBI Significance of Regulatory Sandbox Regulatory Sandbox: Risks and Limitations
- A regulatory sandbox (RS) usually refers to live to test of new products or services in a controlled/test regulatory environment for which regulators may (or may not) permit certain regulatory relaxations for the limited purpose of the testing.
- The RS allows the regulator, the innovators, the financial service providers (as potential deployers of the technology) and the customers (as final users) to conduct field tests to collect evidence on the benefits and risks of new financial innovations, while carefully monitoring and containing their risks.
- It can provide a structured avenue for the regulator to engage with the ecosystem and to develop innovation-enabling or innovation-responsive regulations that facilitate the delivery of relevant, low-cost financial products.
- The RS is potentially an important tool which enables more dynamic, evidence-based regulatory environments which learn from, and evolve with emerging technologies.
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- Innovators may lose some flexibility and time in going through the RS process (but running the sandbox program in a time-bound manner at each of its stages can mitigate this risk).
- Regulators can potentially face some legal issues, such as those relating to consumer losses in case of failed experimentation or from competitors who are outside the RS, especially those whose applications have been/may be rejected.