Niti Aayog Suggests Setting Up Full-Stack Digital Banks To Deepen Access To Financial Services

Niti Aayog has recommended establishing full-stack ‘digital banks’ to deepen the access to financial services in the country.

The government think-tank has elaborated upon a detailed architecture and ‘sequencing of reform’ in a discussion paper concerned around this issue.

The paper will be finalised and subsequently shared as a policy recommendation from Niti Aayog after it receives comments on the same.

“In other words, these entities will issue deposits, make loans and offer the full suite of services that the BR (Banking Regulation) Act empowers them to,” the paper reads, as reported by Financial Express.

It adds, “As the name suggests however, DBs (digital banks) will principally rely on the internet and other proximate channels to offer their services and not physical branches.”

The digital banks will be subjected to prudential and liquidity rules like the incumbent commercial banks for it to be a ‘bank’ in complete sense of its legal definition.

The Niti Aayog has clarified that setting up a new licensing/regulatory framework has been proposed as an innovation on the regulatory front and not as ‘regulatory arbitrage’.

Simultaneously, it has also been maintained that digital banks present a differentiated proposition and hence there remains a scope for transformed treatment in adjacent areas of their operations as well.