The National Institutes of Technology Aayog has presented a roadmap for licensing and regulation for digital banks

The National Institutes of Technology Aayog has presented a roadmap for licensing and regulation for ...

NITI Aayog, a government think tank, has presented a case and provided a roadmap for a licensing and regulatory regime for digital banks that includes consideration of regulatory or policy variance and guarantees equal playing fields to incumbents as well as competitors. It has also discussed a full-scale digital bank license.

The licensing and regulatory framework proposed in this paper is based on four factors, including entry barriers, competition, business restrictions, and technological neutrality.

The government in its Budget for 2022-23 proposed to establish 75 digital banking institutions in 75 districts of the country by scheduled commercial banks.

The book outlines the most common business models in this domain. It demonstrates the challenges presented by the neo-banking partnership approach, which has emerged in India due to a regulatory vacuum and in the absence of a digital bank license.

During the presentation, CEO Parameswaran Iyer highlighted the need for effective technology utilization to meet the banking demands in India.

India has made significant advances in promoting financial inclusion as a result of the Pradhan Mantri Jan Dhan Yojana for the unversed. However, credit penetration remains a policy issue, particularly for MSMEs that contribute 30 percent to GDP, 45 percent to manufacturing output, and 40 percent to exports, while generating employment for a significant part of the population.

The Unified Payments Interface (UPI), which has seen an extraordinary increase, has only enhanced financial inclusion. In October 2021, UPI recorded over 4.2 billion transactions worth Rs 7.7 trillion.

The NITI Aayog report has been prepared following inter-ministerial discussions. Last year, the NITI Aayog published a discussion paper on the topic for wider stakeholder consultations. Comments from 24 organizations were taken into account and adequately addressed in the final report.

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