scorecardresearchHybrid financial products in store as Sebi issues guidelines for interoperable

Hybrid financial products in store as Sebi issues guidelines for interoperable sandbox

Updated: 13 Oct 2022, 11:22 AM IST
TL;DR.

The market regulator’s move is aimed at facilitating testing of innovative hybrid financial products. Read further to know more on this

The RBI’s fintech department would act as nodal point for receiving applications under Inter-operable Regulatory Sandbox (IoRS).

The RBI’s fintech department would act as nodal point for receiving applications under Inter-operable Regulatory Sandbox (IoRS).

Can you imagine to buy hybrid financial products that have features of deposits, capital markets, insurance as well as pension? Well, this could be a reality soon as the capital markets regulator Securities and Exchange Board of India (SEBI) released a standard operating procedure for interoperable regulatory sandbox (IoRS).

This is aimed to facilitate testing of innovative hybrid financial products and services falling within the regulatory ambit of more than one financial sector regulator. A regulatory sandbox allows live, time-bound testing of innovations under a regulator's supervision.

“The Inter-Regulatory Technical Group on FinTech (IRTG on FinTech) has been constituted under the aegis of Sub-Committee of the Financial Stability and Development Council (FSDCSC) for inter-regulatory co-ordination among the financial sector regulators on FinTech-related issues including Inter-operable Regulatory Sandbox (IoRS),” Sebi said.

The Group is chaired by the FinTech Department, RBI with representation from other financial sector regulators such as SEBI, IRDAI, IFSCA and PFRDA and one representative each from Department of Economic Affairs (DEA) and Ministry of Electronics and Information Technology (MeITY)

The FinTech department of RBI would act as nodal point for receiving applications under Inter-operable Regulatory Sandbox or IoRS.

The application for IoRS shall be on ‘on tap basis’. The RS (regulatory sandbox) framework of the regulator under whose remit the dominant feature of the product falls, would govern it as principal regulator (PR).

The regulators under whose remit the other features apart from the dominant feature of the product fall would be the associate regulator.

Two sets of factors would be considered on deciding the dominant feature. Firstly, the type of enhancement to the existing products like loans, deposits, capital market instruments, insurance, G-sec instruments and pension products. And secondly, the number of relaxations sought by the entity for undertaking the test under the IoRS, said Sebi.

“Any co-ordination issue between PR and AR to reach common views on the regulatory treatment of innovative products, services and business models shall be discussed and sorted out in the IRTG on FinTech before initiation of the live testing under IoRS,” the SEBI release said.

The dominant feature would be decided with greater weightage to the number of relaxations sought. The relaxation, if warranted, would be considered by the principal and associate regulator on case-to-case basis and decision to that effect would be binding and final, said the regulator.

First Published: 13 Oct 2022, 11:22 AM IST