Fourth Cohort of RBI’s Regulatory Sandbox will focus on fraud prevention

The Reserve Bank of India has announced the fourth cohort under Regulatory Sandbox. The theme of the latest cohort is ‘Prevention and Mitigation of Financial Frauds’.

The RBI added that the focus would be on “using technology to reduce the lag between the occurrence and detection of frauds”. It should strengthen the fraud governance structure, and minimizing response time to frauds. Alongside, RBI has also decided to allow ‘On-Tap’ applications for cohorts that were previously closed. It has designed this approach to ensure continual innovation and industry interaction, allowing for a proactive reaction to the quickly changing Fintech landscape.

What is Regulatory Sandbox?

It is a framework that allows for live-testing of new products or services in a controlled environment. For this regulators may (or may not) permit certain regulatory relaxations for the limited purpose of the testing.

Further, it can provide a structured avenue for the regulator to engage with the ecosystem. It can also develop innovation that facilitates the delivery of relevant, low-cost financial products. The RS enables the regulator, innovators, financial service providers, and customers (as end-users) to perform field tests. With this, they can gather evidence on the benefits and hazards of new financial innovations while closely monitoring and limiting their risks.

Previous Cohorts

The first cohort of the sandbox focused on retail payments. The RBI received 32 applications, with just six being chosen for the test phase. The following six entities have completed the ‘Test Phase’- Nucleus Software Exports Ltd. (Payne), Tap Smart Data Information Services Private Limited (Citycash), Natural Support Consultancy Services Pvt. Ltd. (IND-e-Cash), Naffa Innovations Pvt. Ltd. (ToneTag), Ubona Technologies Pvt. Ltd. (BHIM Voice) and Eroute Technologies Pvt. Ltd. RBI ended this phase according to this press release.

In its second cohort under the regulatory sandbox, the RBI had announced ‘Cross-border Payments’ as its theme. In the press release, the RBI has mentioned the relaxed eligibility requirements for sandbox applications. It said, “To stimulate innovation and broaden the eligibility criteria, the enabling framework has been modified by lowering the net worth limit from Rs. 25 Lakh to Rs. 10 Lakh. It also allowed Partnership firms and Limited Liability Partnerships (LLPs) to participate in the Regulatory Sandbox.”

The Reserve Bank of India (RBI) most recently announced the opening of the third regulatory sandbox cohort on September 13 with the topic of ‘MSME lending’. 

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Pukhraj Biala

I am an undergraduate student at Symbiosis Law school, NOIDA, pursuing B.A.LL.B. I am a problem solver who believes in reaching to a conclusion by weighing all the options and identifying the best possible one. I find Technology Laws quite fascinating and I continue to follow and learn the subject.

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