Abstract

The Indian financial market has experienced a massive growth spurt in financial technology (FinTech) entities, in the last seven years. This is a much welcome trend in our ever-growing, advanced economy. The rise of FinTech has been seen across various spectrum of financial market, though developing in distinct paces. In India, regulators, lawmakers, and academics are continually trying to sustain the FinTech ecosystem. The Reserve Bank of India's (RBI) deployment of the Regulatory Sandbox serves as an example of such sustainable development. In July 2016, the Reserve Bank of India (RBI) formed an inter-regulatory Working Group (WG) to evaluate and report on the evolving FinTech environment. The Working Group filed the report, which became public on February 8, 2018. The Regulatory Sandbox refers to the live testing of new products or services in a controlled environment, characterised by regulatory relaxation for such limited purpose of testing. It allows the innovators, the service providers as well as the customers to ascertain the risks and benefits of such financial innovations, through field tests. The Regulatory Sandbox aims at fostering responsible innovation in financial sector by promoting efficiency and transparency. Regulatory Sandbox is a real-time alternative to regulatory lag. This article contributes to the available literature by bringing forward the role of Regulatory Sandbox as a form of agile, opportunity-based regulation, that actively encourages innovators in fostering unique innovations. It will enhance the competition points to a public interest function, centered on consumer choice and pricing. Nevertheless, the regulatory pressure to produce successful outcomes in sandbox initiatives and to outperform other innovators might influence the regulatory choices, potentially resulting in distortions that impair competition in FinTech markets.

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