Sign In
Learn bits
Economy, Index & Reports
Mahesh

21/07/22 06:41 AM IST

NITI Aayog Releases Report on Digital Banks

In News 
  • NITI Aayog’s report makes a case and offers a template and roadmap for a licensing and regulatory regime for digital banks.
  • It focuses on avoiding any regulatory or policy arbitrage and offers a level playing field to incumbents as well as competitors.
Major Recommendations
  • Issue of a restricted digital bank licence (to a given applicant) (the license would be restricted in terms of volume/value of customers serviced and the like).
  • Enlistment (of the licensee) in a regulatory sandbox framework enacted by the Reserve Bank of India.
  • Issue of a ‘full-scale’ digital bank licence (contingent on satisfactory performance of the licensee in the regulatory sandbox, including salient, prudential and technological risk management).
  • The report also maps prevalent business models in this domain and highlights the challenges presented by the ‘partnership model’ of neo-banking—which has emerged in India due to a regulatory vacuum and in the absence of a digital bank licence.
Methodology for Licensing 
  • The methodology for the licensing and regulatory template offered by the report is based on an equally weighted ‘digital bank regulatory index’.
  • This comprises four factors—(i) entry barriers; (ii) competition; (iii) business restrictions; and (iv) technological neutrality.
  • The elements of these four factors are then mapped against the five benchmark jurisdictions of Singapore, Hong Kong, United Kingdom, Malaysia, Australia and South Korea.
Why Licensing ? 
  • In recent years, India has made rapid strides in furthering financial inclusion, catalysed by the Pradhan Mantri Jan Dhan Yojana and India Stack.
  • However, credit penetration remains a policy challenge, especially for the nation’s 63-million-odd MSMEs that contribute 30% to GDP, 45% to manufacturing output, and 40% to exports, while creating employment for a significant section of the population.
  • A ‘whole-of-India approach’ towards financial inclusion has also resulted in Direct Benefit Transfer through apps such as PM-KISAN and extending microcredit facilities to street vendors through PM-SVANIDHI.
  • The current credit gap and the business and policy constraints reveal a need for leveraging technology effectively to cater to these needs and bring the under-served further within the formal financial fold.
Source- PIB 

More Related Current Affairs View All

20 Jan

SVAMITVA scheme

'Prime Minister Narendra Modi said once property cards under the Centre’s SVAMITVA scheme have been distributed in all the villages of the country, it could unlock economic a

Read More

17 Jan

Groundwater contamination in India

'Of the 15,239 groundwater samples collected from across the country for testing, 19.8% samples had nitrates — nitrogenous compounds — above safe limits though it must

Read More

17 Jan

Draft data protection rules

'The Ministry of Electronics and Information Technology on January 3, 2025, released the the draft rules for implementing the Digital Personal Data Protection (DPDP) Act, 2023 &mda

Read More

India’s First Ai-Driven Magazine Generator

Generate Your Custom Current Affairs Magazine using our AI in just 3 steps