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The Reserve Bank of India (RBI) has announced the exit of its Second Cohort under the Regulatory Sandbox with cross-border payments as the theme. Four entities out of the eight that were part of the ‘Test Phase’ were selected by the reserve bank.

The entities include neobanking unicorn Open, along with Cashfree Payments, PayNearby and Fairexpay. All of these entities completed the ‘Test Phase’ of the second cohort.

“The products were evaluated based on mutually agreed test scenarios and expected outcomes. All the above four products have been found viable within the boundary conditions defined during testing under Regulatory Sandbox,” RBI said.

According to the RBI, these entities can now provide their cross-border payment solutions to regulated entities such as banks and NBFCs.

RBI’s release read, “The aforesaid entities have now exited the Second Cohort of the Regulatory Sandbox on ‘Cross-Border Payments’. The products found acceptable under this Cohort may be considered for adoption by Regulated Entities subject to compliance with applicable regulatory requirements.”

What Do These Companies Do?

Cashfree Payments’ product looks to allow Indian fintech companies to offer the purchase of shares, exchange-traded funds (ETF) units and other assets listed on foreign exchanges via UPI/Net Banking as a feature to Indian investors.

Fairexpay provides an aggregation platform of cross-border payment providers for outward remittance. 

NearbyPay allows routing the inward cross-border remittance to the beneficiary’s Aadhaar number as a virtual bank account by using the existing Rupee Drawing Arrangement (RDA) mechanism.

Lastly, Open, one of India’s 22 fintech unicorns, is a neobank that offers B2B services such as payment solutions, APIs and payment gateways that allow for cross-border payments.

RBI’s Cohorts For Fintech Solutions

RBI has introduced three cohorts to develop fintech solutions since November 2019.

RBI’s first cohort under the Regulatory Sandbox was around the theme of retail payments and was first launched in November 2019. The cohort received applications from 32 entities of which six were selected for the ‘Test Phase’.

Some of the entities that were approved in the first cohort include ToneTag, PaySe, Citycash and BHIM Voice, among others.

The latest RBI cohort to close was launched in December 2020. The second cohort under the Regulatory Sandbox for cross-border payments received 27 applications from 26 entities. The central bank only selected eight for the ‘Test Phase’, of which four were approved for cross-border payments.

The third cohort for MSME Lending is already underway from the central bank. The cohort, announced in September 2021, received 22 applications. The ‘Test Phase’ for the same started in June 2022 and includes eight entities.