[LiveMint] Opinion | How regulatory sandbox can be tailored to the Indian context
Smita Aggarwal, Investments and Policy Advisor at Flourish, recently contributed to LiveMint's Opinion section to share insights on shares how regulatory sandbox provides an opportunity for India to be a role model for having innovation-friendly and inclusion-focused regulation.
"The recently announced framework for regulatory sandbox by the Reserve Bank of India (RBI) is a progressive and much-needed step. Consider yourself as a founder of a fintech startup that has developed a mobile app for farmers that allows him to track local weather updates, purchase seeds, crop insurance, commodity put options and manage his cash flows from sales. This app could be a one-stop solution for many needs of a farmer and with technology innovation it’s feasible. However, before it can be launched, the fintech startup would need to get regulatory approvals and comply with necessary conditions. Often the challenge for fintech startups is that regulation does not explicitly cover what they plan to do since it’s a completely new product or service. Ambiguity around governing regulations hampers innovation and the ability to scale," Aggarwal writes.
"A regulatory sandbox is a useful tool for the regulator and fintech innovators for such situations where there is absence of governing regulations or where there may be a need to modify existing regulations because the proposed innovation shows the promise of ease to customers in a significant way. A regulatory sandbox is a safe space which allows regulators to facilitate small-scale tests by temporarily relaxing certain regulations to collect empirical evidence while containing risks. In the example above, under the regulatory sandbox framework, RBI can allow the app to be launched with farmers within certain limits and for a specific period. At the end of the period, RBI will have the feedback on the utility of this innovation and the risks arising from it. Technology and business models are evolving rapidly and regulators may not have the opportunity or capacity to assess the true implications of many innovations unless they are tested. Such small-scale tests can provide the objective and time-bound evidence to the process of regulatory decision-making," she continues.
Read the full article here on LiveMint. For more thoughts and insights from Smita Aggarwal, follow her on Twitter.