Over the past few years India has seen rapid development in the financial technology sector and it has the second highest number of Fintech startups in the world. According to certain estimates, India’s Fintech sector added about 1,300 startups from 2015 to 2018. According to the National Association of Software and Services Companies, India’s Fintech market is expected to be worth US$2.4 billion by 2020.
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Samvad Partners
While the use of technology is beneficial in terms of innovation, efficiency, convenience and advanced security, it also requires identification, monitoring and regulation of new risks. The absence of regulatory certainty in the Fintech sector could hamper its development. In view of the growing number of technological innovations and their impact on the Indian financial sector, the Reserve Bank of India (RBI) had set up a working group in July, 2016, to study the Fintech landscape in India and across the globe and suggest changes to the existing regulatory framework.
The working group released its report and recommendations on 23 November 2017. One of the key recommendations of the working group was the creation of a regulatory sandbox, which, in essence, is a controlled environment where new products and services can be tested. The intent of a regulatory sandbox, from a regulator’s perspective, is to allow it to engage with the ecosystem and formulate regulations that aid and assist the delivery of low-cost products while managing risks. For startups, such a system can be an invaluable opportunity to test the commercial viability of products and to understand applicable regulations, as well as to engage in open dialogue with the regulator, before committing to a full-scale launch.
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Nivedita Nivargi is a partner and and Vishnu Kale is an associate at Samvad Partners.
Samvad Partners
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