FRAMEWORK FOR REGULATORY SANDBOXES RELEASED
Requires entities to comply with provisions of DPDP Act
AJINKYA KAWALE
Mumbai, 28 February
The Reserve Bank of India (RBI) on I Wednesday revised the timeline for the completion of various stages of a Regulatory Sandbox (RS) to nine months from the previous seven. The updated framework for an RS also requires sandbox entities to ensure compliance with provisions of the Digital Personal Data Protection Act, 2023. “The framework (for RS) has been revised based on the experience gained over the last four and half years in running four cohorts and feedback received from fintech's, banking partners and other stakeholders,” the central bank said in a release. A sandbox entity should ensure it has appropriate technical and organisational measures for the compliance of the provisions under the Digital Personal Data Protection Act, the banking regulator added. Entities should ensure safeguards to prevent breach of personal data. “The sandbox must process all the data in its possession or under its control with regard to RS testing, in accordance with the provisions of gital Personal Data Protection Act, 2023, RBI said in its revised framework for sandbox entities. An RS refers to live testing of new products or services in a controlled regulatory environment for which regulators may or may not permit certain regulatory relaxations for the limited purpose of testing. It enables the regulator, financial service providers and customers to conduct field tests to collect evidence on benefits and risks of new financial innovations, while monitoring and containing their risks. The different processes and stages involved in a RS includes a preliminary screening, the assessment of application and shortlisting, formulation of test design and integration phase, and a testing and evaluation phase. The target applicants for entry to the RS include fintech's, banks, and companies partnering with or providing support to financial services businesses, among others. The RS may run a few cohorts (end-to-end sandbox process), with a limited number of entities in each cohort testing their products during a stipulated period, according to the Enabling Framework for Regulatory Sandbox.
4-yrroad map to
disclose climate
risks proposed
The Reserve Bank of India (RBI) on
Wednesday proposed a four-year road map
starting 2025-26 for regulated entities (REs)
- banks, financial institutions, and nonbanking finance companies (NBFCs) - to
disclose climate-related financial risks
under the standard framework.
The regulated entities would have to
give information related to risks covering
four areas - governance, strategy, risk management, metrics, and targets.
Under the draft plan, RBI commercial
banks, All India financial institutions,
and top and upper layer NBFCs
will have to begin to provide
information on governance,
strategy, and risk management
strategy from 2025-26 and
begin disclosure metrics and
targets from 2027-28.
The Urban Cooperative
Banks in Tier-IV, those with
deposits more than 210,000 crore
would begin to make disclosures on governance, strategy., risk management
strategy from FY27, and metrics and targets
from FY29.
The payment banks, regional rural
banks, and local area banks are excluded
from disclosures. RBI in the draft disclosure
framework said REs are already required to disclose information on material risks as
part of their Pillar 3 disclosures.
There was a need for REs to disclose
more structured information about their
climate-related financial risks and opportunities for the users of financial statements as it would foster an early assessment of risks and opportunities and also
facilitate market discipline, it said.
There was a need for a better, consistent,
and comparable disclosure framework for
REs, as inadequate information about climate-related financial risks can lead to mispricing of assets and misallocation of capital by them, it added.
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