The Power of Collaboration: Innovation with the Inter-operable Regulatory Sandbox (IoRS)

The transition from idea to product can be difficult for Fintech Companies in India and abroad, grappling with regulatory considerations, particularly when the solution crosses regulations such as retail banking or capital markets. One bright spot is that India’s regulators, perhaps best led by the International Financial Services Centres Authority (IFSCA), have launched an innovative framework called the Inter-operable Regulatory Sandbox (IoRS).

The IoRS is a framework with a single testing platform for hybrid financial products or services that cut across at least two financial regulators. In my work with GIFT City IFSC and cross-border finance, I view the IoRS as critical to the future of next-generation products that simplify how to invest in India from abroad and enable us to work even more globally.

What does the Interoperable Regulatory Sandbox mean? 

A Regulatory Sandbox is the “live testing” of new products in a controlled environment with relaxation of regulations. Regulators such as the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI), and IFSCA have their own sandboxes. 

The IoRS, however, goes a step further by providing a shared entry point for innovators. The IoRS also allows for collaboration among multiple regulators, which helps to manage the complexity involved in hybrid financial products such as InsurTech, WealthTech, RegTech, SupTech, and across-border payment solutions.

Who is Involved, and What Can Be Tested? 

The IoRS framework is supported by all key financial regulators: 

• RBI: Banking and payments. 

• SEBI: Securities markets. 

• IRDAI: Insurance products. 

• PFRDA: Pension innovations (as an Associate Regulator). 

• IFSCA: Umbrella regulator of GIFT City IFSC. 

Eligible products include: 

• Cross-border payment solutions. 

• Digital payment and settlement. 

• Insurance products linked to banks/securities (InsurTech). 

• Indian real estate investments are linked to a product. WealthTech, tax-free products under GIFT City registration. 

For example, a startup that links a customer's equity portfolio (SEBI) with a payment mechanism (RBI) or an insurance product covering risks in an Indian real estate investment fund (SEBI + IRDAI) would be tested under the IoRS.

The Function of the Principal and Associate Regulators

The IoRS framework operates under the structure of Principal Regulator (PR) and Associate Regulators (ARs): 

• PR: The regulator under whose regulation most characteristics of a product fall, Part (of the regulation). 

• ARs: Regulators that supervise the secondary features. 

The PR oversees eligibility and timelines for testing and the criteria under regulation, and collaborates with the ARs to oversee product concerns, which the regulation relates to that specific product.  

For foreign FinTech firms entering India or Indian companies that expand globally, the IFSCA will serve as the PR, which will make GIFT City IFSC the preeminent and favoured venue for international financial innovation, establishing GIFT City and its local ecosystem as a mechanism for facilitating tax-free investment and cross-border access to financial markets.  

Advantages of working with IoRS for innovators

• All testing activities are conducted under the supervision of regulators and thus involve a controlled testing situation.

• A single-window, streamlined interaction with multiple regulators.

• Shorter ti

me to market, especially for more complex, multi-sectoral products.

• Issuance of a pathway for foreign FinTech innovators who are interested in GIFT City registration and registration with Gift CFO for compliance guidance.Application Process

You can apply anytime throughout the year (on a tap basis). It is straightforward;

• Must complete a single form and send it to the Coordination Group at the FinTech Department of RBI, at the following address: iors@rbi.org.in. 

• Preliminary scrutiny is done in the RBI. 

• Detailed scrutiny is done by the Principal Regulator in consultation with Associate Regulators.

Why This Matters

The Inter-operable Regulatory Sandbox is more than just a regulatory tool, it’s a catalyst for innovation. By enabling multi-regulator collaboration:

• Encourages Fintech companies in India to develop globally competitive products.

• Simplifies how to invest in India from abroad through regulated digital channels.

• Strengthens GIFT City IFSC as a hub for cross-border finance and tax-free investment.

For innovators, policymakers, and investors, IoRS signals India’s commitment to building a globally competitive, well-regulated financial ecosystem.

For compliance and smoother entry into the Indian market, consider registration with Gift CFO, your partner in navigating GIFT City’s dynamic regulatory landscape.