On August 6, 2020, the Reserve Bank of India launched “Innovation Hub” for ideation and incubation of new capabilities that can be leveraged to deepen financial inclusion.
About Innovation Hub
The hub is being launched to promote the start ups in the country. It will help in ideation and incubation of new capabilities. This will in turn help to deepen financial inclusion in the country and promote efficient banking services.
The hub is to act as a centre to create viable and innovative financial products. This will provide the following benefits
- The hub will help achieve efficient banking
- Business continuity in times of emergency
- Strengthening consumer protection
The RBI has recently taken several similar initiatives to encourage responsible innovation. One such recent initiative is the “Regulatory Sandbox”.
A Regulatory Sandbox refers to live testing of new products and services in a controlled regulatory environment where the regulators may permit regulatory relaxations to limit purpose of testing. This framework will act as a boost for the financial technology startups that are looking to innovate. The main aim of the sandbox is to foster responsible innovation in financial services, bring benefits to consumer and promote efficiency.
RBI will launch Sandbox for the entities that meet the criteria of minimum net worth of Rs 25 lakh. The entity should either be a company registered in the country or banks licensed to operate in India.
According to NITI Aayog, 1 trillion USD worth Small and Medium Enterprises (SME) will be digitally disbursed by 2029. Also, India is one of the fastest growing fintech markets in the world.
The Indian Fintech ecosystem attracts 6 billion USD investments globally since 2014. The Fintech companies use technologies to provide payments, crowdfunding, peer-to-peer lending. Therefore, to protect consumers and safeguard their interests, there is a need to regulate and supervise fintech firms. Also, there is need to bring in new fintech products to keep up the competition in the world.