Government think-tank Niti Aayog on Wednesday proposed setting up of full-stack ‘digital banks’, which would principally rely on the internet and other proximate channels to offer their services and not physical branches, to mitigate the financial deepening challenges being faced in the country. The Aayog, in a discussion paper titled ‘Digital Banks: A Proposal for Licensing & Regulatory Regime for India’, makes a case and offers a template and roadmap for a digital bank licensing and regulatory regime for the country.
Digital banks or DBs are banks as defined in the Banking Regulation Act, 1949 (B R Act), the paper said.
“In other words, these entities will issue deposits, make loans and offer the full suite of services that the B R Act empowers them to. As the name suggests however, DBs will principally rely on the internet and other proximate channels to offer their services and not physical branches,” it said. The paper noted that India’s public digital infrastructure, especially UPI, has successfully demonstrated how to challenge established incumbents. UPI transactions measured have surpassed Rs 4 lakh crore in value. Aadhaar authentications have passed 55 lakh crore.