IFSCA Fintech Sandbox Framework
The International Financial Services Centres Authority (IFSCA) has proposed a dedicated FinTech Sandbox Framework to encourage innovation in financial services within the IFSC ecosystem. Building on the earlier framework of April 2022, the new draft aims to provide structured support through Regulatory Sandbox, Innovation Sandbox, Inter-Operable Regulatory Sandbox (IoRS), and Overseas Regulatory Referral Mechanisms, covering sectors like banking, capital markets, insurance, funds, pensions, and allied financial technologies.
The framework applies to both domestic and foreign entities and grants a Limited Use Authorisation (LUA) to eligible applicants for developing and testing innovative products or solutions under defined boundary conditions such as customer scope, transaction limits, geography, and duration. The process involves a two-stage application (Preliminary and Final) via the SWIT portal, with approvals subject to compliance, risk safeguards, and partnerships with testing institutions.
Sandbox testing is normally capped at 12 months (extendable by 6 months), with obligations for clear disclosure of risks to users, grievance redressal, and reporting of key performance indicators to IFSCA. Entities must submit interim and final reports, maintain records for seven years, and comply with financial reporting in convertible currencies (other than INR) if handling customer funds.
The framework also details conditions for revocation of authorisation, early sandbox exit, regulatory relaxations, and post-testing obligations. Specific provisions govern innovation testing in isolated environments (Innovation Sandbox), cross-regulator models (IoRS), and international cooperation (FinTech Bridges).
Overall, the framework seeks to establish a comprehensive, unified regulatory architecture to foster growth of FinTech innovations, ensure user protection, and align with global best practices.
