Niti Aayog has Proposed a Three-Step Process for Full-Stack Digital Banks

Share Us

394
Niti Aayog has Proposed a Three-Step Process for Full-Stack Digital Banks
21 Jul 2022
5 min read

News Synopsis

The Niti Aayog proposed a roadmap for the establishment of full-stack digital business/consumer banks on Wednesday in order to broaden access to financial services in the country.

The think tank also advised the Reserve Bank of India to take a three-step approach to digital bank licencing (RBI). In the first phase, an applicant should be granted a restricted digital bank licence with restrictions on the volume/value of customers serviced and the like. The RBI will place the licensee in a regulatory sandbox framework in the second stage.

Finally, the issuance of a 'full-scale' digital bank licence will be contingent on the licensee's satisfactory performance in the regulatory sandbox, which includes salient, prudential, and technological risk management.

According to the policy paper, a full-stack digital business/consumer bank will be required to bring in Rs 200 crore capital upon progression from the sandbox with an initial capital of Rs 20 crore into the final stage (equivalent to that required of the Small Finance bank).

The term "digital banks" or "DBs" refers to banks as defined in the Banking Regulation Act of 1949. In other words, these entities will issue deposits, make loans, and provide the full range of services authorised by the Act. As the name implies, DBs will primarily offer their services via the internet and other nearby channels, rather than physical branches.

 

TWN In-Focus