Nepal Rastra Bank Publishes Draft Directive on ‘Regulatory Sandbox’ to Promote Financial Innovation

In a significant move toward modernizing Nepal's financial ecosystem, Nepal Rastra Bank (NRB) has released a draft directive on the implementation of a Regulatory Sandbox. The initiative is aimed at encouraging innovation in financial products and services by allowing controlled testing of new technologies in the financial sector.

What is a Regulatory Sandbox?

A Regulatory Sandbox is a controlled environment where innovators, fintech companies, banks, and financial institutions can test new financial products, services, or business models under the supervision of regulatory authorities. This testing is conducted within defined parameters and timeframes. Only upon successful testing are such innovations allowed to be fully launched in the open market.

• Promotion of Innovation: The sandbox aims to encourage the development of cutting-edge financial products and services based on technologies like blockchain, artificial intelligence, and more.

• Risk Management: Before entering the wider market, innovations will be tested for potential risks such as cyber threats, consumer protection issues, and financial stability concerns.

• Financial Inclusion: Special focus will be given to testing solutions that aim to reach underserved or excluded populations, improving access to banking and financial services.

• Collaborative Ecosystem: The directive envisions a collaborative environment between regulators, innovators, and financial institutions to foster collective growth of the financial sector.

Nepal Rastra Bank has invited feedback and suggestions from stakeholders on the draft before finalizing the directive. Once implemented, the sandbox is expected to bring significant transformation in areas such as digital payments, insurance, investment platforms, and other fintech innovations.

Experts believe this initiative will play a crucial role in guiding Nepal toward a more robust and inclusive digital economy.