The framework document doesn't provide any legal waiver to the companies operating in the sandbox. Furthermore, any loss incurred by the customer would have to be borne by the sandbox entity

Startups taking part in Reserve Bank of India’s proposed regulatory sandbox would be required to take an insurance cover based on the risk of operation and potential customer liability before entering the programme, the central bank said in its final framework document released on Tuesday.

“Sandbox entities shall be required to take liability/indemnity insurance of an adequate amount and period to safeguard the interest of the customers,” as per the document. The regulator had earlier placed a draft regulation inviting stakeholder comments on the public domain in April.

The cover of the policy would be based on factors such as exposure to customers, number of claims that may arise of a single event and number of claims expected during the operating period of sandbox.

“The policy cover shall begin with the start of testing stage and end three months after exit of the sandbox entity from the RS.”

The framework document also doesn’t provide any legal waiver to the companies operating in the sandbox. Furthermore, any loss incurred by the customer would have to be borne by the sandbox entity, the central bank said.

The Regulatory sandbox is a special environment to enable time-bound testing of innovations under a regulator's oversight. It allows for the testing of new financial products, technologies, and business models under a set of rules and supervisory requirements, with appropriate safeguards.