RBI unveils first cohort to test regulatory sandbox, appoints GC for innovation hub

The Reserve Bank of India (RBI) on Tuesday made two announcements relating to innovation in the financial technology sector in the country.

RBI announced the opening of  the first cohort under its Regulatory Sandbox (RS) with retail payments as its theme. The central bank unveiled two fintech entities of the six selected from 32 applications in the maiden test phase cohort.

The commencement of testing, RBI said, was delayed due to the Covid-19 situation.

In August 2019, the central bank finalised guidelines for the regulatory sandbox to test innovative financial products and technologies, in a bid to help financial service providers collect evidence on the benefits and risks of new innovations in a regulated environment monitored by RBI.

Fintech companies including startups, banks, financial institutions and companies providing financial services were encouraged to apply for the programme. 

The two selected entities that have begun testing of their products from Monday are Natural Support Consultancy Services and Nucleus Software Exports. The remaining four are expected to start the test phase shortly which will be communicated as and when they do so, RBI added.

Jaipur based Natural Support Consultancy Services operates eRupaya, a set of near-field communication (NFC) based prepaid card, and NFC enabled point of sale (PoS) device, to facilitate offline person-to-merchant (P2M) transactions and offline digital payments in remote locations.

New Delhi headquartered Nucleus Software Exports operates an offline digital cash product, PaySe, which will help connect with rural areas for e-payments. The product proposes to help in digitisation of payments in rural areas, starting with Self Help Groups (SHG), through an offline payment solution and a digitised SHG-centered ecosystem.

Reserve Bank Innovation Hub

RBI, in its monetary policy statement on development and regulatory policies dated August 06, 2020, had announced that the Bank will set up Reserve Bank Innovation Hub (RBIH) 

In its second announcement on Tuesday, RBI announced appointment of a governing council (GC) for its Reserve Bank Innovation Hub (RBIH) to guide and manage the promotion of innovation across the financial sector by leveraging technology. 

The GC will be led by Infosys co-founder Senapathy (Kris) Gopalakrishnan, who is currently also the ‘Chief Mentor’ of Start-up Village, an incubation hub for start-ups. The GC’s CEO is yet to be appointed.

Other members GC are -- IIT Madras professor Ashok Jhunjhunwala, IISc Bengaluru principal research scientist H Krishnamurthy, TVS Capital Funds CMD Gopal Srinivasan, former NPCI CEO AP Hota, former Syndicate Bank CMD Mrutyunjay Mahapatra, RBI executive director  Rabi Sankar, RBI’s Department of Information Technology CGM Deepak Kumar, and director of Institute for Development & Research in Banking Technology, Hyderabad K Nikhila.

RBIH, first announced in March 2019, was set up to collaborate with financial sector institutions, technology industry and academic institutions and coordinate efforts for exchange of ideas and development of prototypes related to financial innovations. “It would develop internal infrastructure to promote fintech research and facilitate engagement with innovators and start-ups.” RBI added.