Sebi's Revised Framework For Innovation Sandbox

To boost the development of the securities market and usage of financial technology (FinTech) companies, the Securities and Exchange Board of India (Sebi) issues a revised framework for innovation sandbox.

The market regulator feels that to create an ecosystem that promotes innovation in the securities market, FinTech firms should be able to access market-related data and test environments that are not readily available to them.

As per the revised framework, a steering committee would be formed that will supervise the operations of the innovation sandbox. This will aid FinTech companies to test their innovations more effectively before offering such innovative products in a live environment believes Sebi. 

“Innovation Sandbox facilitates access to an environment (testing facilities and test data) provided by enabling organisation’s like Stock Exchanges, Depositories, and Qualified Registrar and Share Transfer Agents (QRTAs) wherein innovators (hereinafter referred to as Sandbox Applicants) would be testing their innovations in isolation from the live market and would be used for offline testing of the proposed solution of the applicant,” says Sebi in its circular. 

In the first stage of the innovation sandbox, limited access to the test environment would be provided with a certain cap on the utilisation of the resources in terms of processing power, memory, and storage. 

In the second stage, the cap on the utilisation of resources will be removed subject to the availability of resources then. Also, the datasets would be available to applicants which should be clearly defined and know to market participants as well. “Access to datasets shall be provided in a phased manner starting with a limited amount of data and based on validations, more exhaustive data would be provided to applicants,” says Sebi. 

As there would be multiple applications with similar ideas in the innovation sandbox, as per Sebi, no claim concerning the Intellectual Property Rights (IPR)should be applied in the innovation sandbox.

The COVID-19 pandemic has completely changed the digital payments landscape and the Fintech firms have started realising the benefits and convenience they have to offer to the consumers. 

“The FinTech industry needs support for creating newer offerings for specific slivers of the Indian economy. We continue to have strong regulatory oversight across all aspects of the financial services industry. Additionally, startups would need a regulatory sandbox that encourages innovation and experimentation,” says Prateek Mehta, Co-Founder, and CBO, Scripbox.