PFRDA mulling coordination with Nasscom, startups to use regulatory sandbox for social security programme
The regulator is in the process of undertaking steps to identify the areas under the National Pension System (NPS) which could utilise the financial technologies (fintech) using the regulatory sandbox approach for the benefit of subscribers and NPS as a whole
Pension fund regulator PFRDA is considering to coordinate with IT industry body Nasscom and start-ups to “create a buzz” around its plan to use regulatory sandbox or live-testing of innovative products for its flagship social security programme NPS.
The regulator is in the process of undertaking steps to identify the areas under the National Pension System (NPS) which could utilise the financial technologies (fintech) using the regulatory sandbox approach for the benefit of subscribers and NPS as a whole.
A regulatory sandbox (RS) usually refers to live-testing of new products or services in a controlled and test regulatory environment for which regulators may or may not permit certain regulatory relaxations for the limited purpose of the testing.
Last month, the Reserve Bank of India proposed that fintech start-ups could set up regulatory sandbox in segments such as retail payments, money transfer, artificial intelligence and data analytics in the financial sector.
“It is important to create a buzz around the regulatory sandbox for its success. Hence, the Authority may like to publicise the launching of sandbox activity at each stage through social media and other platforms,” said a report of the committee set up by the PFRDA.
The panel has proposed that a website for the RS may be launched or a separate section may be created on the existing Pension Fund Regulatory and Development Authority (PFRDA) website.
The authority may coordinate with Nasscom and the 10,000 start-up programme for tapping into the Information Technology start-ups and draw their attention to PFRDA Sandbox for effective participation — this is one of the key recommendations of the panel.
It further said the PFRDA may share findings from the test with the financial services industry and regulators, while ensuring that no confidential information such as consumer data or proprietary information is disclosed.
The panel notes that the fintech applications may be useful in areas like paperless pension account generation, compliance to KYC/due diligence and prevention of money laundering, financial inclusion and flow of contributions from subscriber through banking channels to pension funds, among others.
The regulator has sought comments on the report of the committee by May 21. The NPS utilises a completely digital architecture with pension funds, custodian of securities, central record keeping agencies, points of presence and government nodal offices among other intermediaries which are engaged with the system in terms of data/information as well as money flow.
