The Reserve Bank of India on Wednesday eased eligibility criteria for applicants under its regulatory sandbox (RS) initiative and announced the second cohort theme of 'cross-border payments'. It also reduced net-worth requirement for entities interested in participating.

Regulatory sandbox refers to live-testing of new products or services in a controlled regulatory environment for which regulators may or may not permit certain relaxations for the limited purpose of the testing. The RS allows the regulator, innovators, financial service providers and customers to conduct field tests to collect evidence on the benefits and risks of new products and systems.

To encourage innovation and broad base the eligibility criteria, the enabling framework has been modified by reducing net worth requirement from the existing Rs 25 lakh to Rs 10 lakh. Besides, partnership firms and limited liability partnerships (LLPs) have been allowed to participate in the RS.

RBI had announced opening of the first cohort under RS with the theme of 'Retail Payments'. It has also decided on 'MSME Lending' as the theme for the third cohort, details of which it will announce later.

Entities meeting the eligibility criteria and having product technologically ready for testing in the RS and/or deployment in the broader market, as per the theme of the cohort, may apply, it said. The window for submission of applications will be open from 21 December to 15 February 2021.

India is the largest recipient of inbound remittances, accounting for 15% of global share. In 2019, India received $83 billion and in the first half of 2020, has received $27.4 billion, the central bank said.

Further, the daily average turnover of over-the-counter (OTC) foreign exchange instruments in India is approximately $40 billion."The Cohort is expected to spur innovations capable of recasting the cross-border payments landscape by leveraging new technologies to meet the needs of a low cost, secure, convenient and transparent system in a faster manner," RBI said.

As per the enabling framework for RS, entities may not be suitable for the RS if the proposed financial service is similar to those already being offered in India, unless the applicants can show that either a different technology is being applied or the same technology is being implemented in a more efficient and effective manner, it said.

The objective of the RS is to foster responsible innovation in financial services, promote efficiency and bring benefit to consumers.

The target applicants for entry to the RS are fintech companies, including startups, banks, financial institutions, any other company, LLP and partnership firms partnering with or providing support to financial services businesses.

In November, RBI had received applications from 32 entities for the first cohort under its regulatory sandbox initiative. Out of this, six have been selected for the test phase. Two entities started testing their products on 16 November and the remaining four are expected to start the test phase shortly, the central bank had said.