Digital Banking: NITI Aayog said regulatory framework is needed to promote digital banks

Business desk. NITI Aayog, which is called the government’s think tank, has said that there is no dearth of technology to facilitate digital banks in India and there is a need to create a regulatory framework to promote it. , In a report titled ‘Digital Banks: A Proposal for Licensing and Regulatory Regime for India’, NITI Aayog has presented a roadmap for digital bank licensing and regulatory regime in the country. have done it.

Highlighting the success of UPI, the report said that Aadhaar authentication has crossed 55 lakh crore in the country. This shows that India is capable of operating an open banking system. This shows that the technology is available to support digital banking in India. The regulatory framework and policies outlined for digital banking give India an opportunity to consolidate its position as a global leader in fintech, while simultaneously addressing several challenges, the report said. The success of India’s public digital infrastructure, particularly the Unified Payments Interface (UPI), has made it clear that already established players in the market can be challenged. UPI transactions in the country have crossed Rs 4 lakh crore.

The report suggests the introduction of a restricted digital business bank license and a restricted digital consumer bank license. The applicant who obtains this license is listed in the regulatory sandbox and begins operations in the sandbox as a Digital Business Bank/Digital Consumer Bank. Restrictions may be relaxed based on the satisfactory performance of the Licensee in the sandbox. On the capital requirement, the report said the digital business bank would be required to bring in a minimum paid-up capital of Rs 20 crore in the restricted phase. 200 crores would be required to come out of the sandbox to become a fully digital business bank.

Read More: Bank Regulations: These steps will show you how to effortlessly remove money from closed bank accounts.

The licensing regulatory methodology proposed by the report is based on a uniform ‘Digital Bank Regulatory Index’. This includes four things- barriers to entry; competition; Trade sanctions and technical neutrality. Regarding cyber threats, the report said, just as traditional banks face many challenges in services like net banking, digital banks also face almost similar challenges, such as phishing, malware, spyware, etc. The report also maps out the prevailing business models in the sector and highlights the challenges posed by the ‘Partnership Model’ of New Banking.

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