Kathmandu: In a significant step towards encouraging innovation in the financial sector, Nepal Rastra Bank (NRB) has prepared a draft framework for a ‘Regulatory Sandbox’.
This initiative aims to allow controlled testing of new technologies, products, and services within the financial system, providing innovators with a supervised environment to experiment before full-scale implementation.
The central bank has called for feedback on the draft, emphasizing its goal to support responsible innovation while enhancing financial inclusion.
The Regulatory Sandbox is expected to create an enabling regulatory atmosphere for the development and implementation of technology-driven financial innovations.
According to the draft, the Regulatory Sandbox will serve as a controlled and closely monitored testing environment where participating institutions can trial their products, services, or solutions under the guidance of NRB and based on pre-defined terms. The purpose is to enable data-driven evaluation of these innovations before they are launched commercially.
The document highlights that the initiative will support innovations that aim to expand access, improve usage, and raise the quality of digital financial services. The sandbox will particularly cater to FinTech innovations, ensuring consumer protection and systemic financial security while encouraging real-time testing.
Furthermore, the sandbox seeks to promote collaboration between traditional financial service providers and FinTech innovators. It will help bring emerging technologies under regulatory oversight, ensure effective risk management, and facilitate a regulatory dialogue around new technologies.
NRB envisions the sandbox as a platform that not only helps in monitoring the entry of innovative technology-based services but also strengthens the capability to supervise them without posing systemic risks to the financial system. This move is expected to foster responsible innovation, expand financial access, and inform future regulatory reforms in line with the growing demands of the financial sector.
While the sandbox primarily targets FinTech innovators, it will also be open to general financial service innovators who have already developed their products, services, or business models and are ready for testing.
Activities conducted within the sandbox must be within the scope of Nepal’s existing laws and regulations, and NRB will supervise them accordingly. The draft also proposes the inclusion of banks, financial institutions, payment system operators, payment service providers, and remittance companies within the sandbox framework.
Additionally, eligible FinTech companies seeking to innovate legally under existing laws will also be considered for inclusion.
By laying this regulatory groundwork, Nepal Rastra Bank aims to facilitate technological advancement in the financial services sector while ensuring safety, transparency, and consumer confidence.
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