A Smooth Run For The Fintech Space

Regulatory sandbox is all set to give the required fillip to fintech companies

- Aparajita Gupta

Fintech has exploded in India in the last couple of years but there is still room for massive growth. With several startups in the space of lending, payments, insurance, trading, India is currently emerging as a hub for fintech products.

Globally, regulators face the challenge of nurturing innovation without over-regulating, but at the same time protecting consumer interests. To overcome this challenge, many countries have adopted a ‘Regulatory Sandbox’ based approach where the regulator works closely with emerging Fintech firms. And India is no exception in this approach.

To facilitate these fintech startups, the apex Indian bank—Reserve Bank of India (RBI)–has come up with a draft to enable a framework for the regulatory sandbox.

Back in July 2016, RBI had set up an inter-regulatory working group to look into and report on the granular aspects of fintech and its implications, in order to review the regulatory framework and respond to the dynamics of the rapidly evolving fintech space.

The report of the working group was released on February 8, 2018, for public comments. One of the key recommendations of the group was to introduce an appropriate framework for a regulatory sandbox within a well-defined space and duration where the financial sector regulator will provide the requisite regulatory guidance, which will increase efficiency, manage risks and create new opportunities for consumers. The fintech companies have lapped up the proposal of a regulatory sandbox and exuded the confidence of having a better innovation space with the sandbox around.

Harshil Mathur, Co-founder, and CEO, Razorpay, said, historically, the regulators have not really looked at the fintech companies in a different light.