The federal government think-tank Niti Aayog on Wednesday advised establishing of full-stack ‘digital banks’ to deepen entry to monetary providers within the nation.
In a dialogue paper, Niti Aayog examines the worldwide situation, and based mostly on the identical, recommends a brand new section of regulated entities — full-stack digital banks.
An in depth structure and sequencing of reform has been proposed on this paper, the aim of which is to undertake stakeholder consultations. Primarily based on the feedback acquired, the paper can be finalised and shared as a coverage suggestion from Niti Aayog.
Upon development from the sandbox into the ultimate stage, a full-stack digital enterprise financial institution can be required to herald `200 crore (equal to that required of the Small Finance financial institution). “Digital Banks” or DBs referred on this Paper means Banks as outlined within the Banking Regulation Act, 1949 (BR Act).
“In different phrases, these entities will difficulty deposits, make loans and provide the total suite of providers that the BR Act empowers them to. Because the identify suggests nonetheless, DBs will principally rely on the web and different proximate channels22 to supply their providers and never bodily branches,” the think-tank stated within the paper. Nevertheless, as a pure corollary to being a “Financial institution” in full sense of its authorized definition, it’s proposed that DBs can be topic to prudential and liquidity norms at par with the incumbent business banks, it stated.
Creating a brand new licensing / regulatory framework is being proposed as regulatory innovation and never as regulatory arbitrage. “
Having stated that, DBs provide a differentiated proposition and as such, there’s scope for differentiated therapy in adjoining areas of their operation according to treating them identically with incumbent business banks, within the crucial areas of prudential and liquidity threat, it added.