New Delhi:  A licensing and regulatory framework for digital banks has been proposed by the government regulator NITI Aayog. It includes a template and a roadmap that emphasises avoiding regulatory or policy arbitrage and provides both incumbents and challengers with an even playing field.

A restricted digital bank license should be issued to these financial institutions, according to Niti Aayog's recommendation in a paper titled "Digital Banks - A Proposal for Licensing and Regulatory Regime for India." A "full-scale" digital bank license was proposed. The report's licensing and regulatory template is based on a methodology that takes four elements into account: technological neutrality, entrance hurdles, competitiveness, and commercial constraints.

Taking forward the agenda of fintech innovations and commemorating 75 years of Indian independence, the government in its Budget for 2003-23 suggested that 75 digital banking units be set up by scheduled commercial banks in 75 districts across the nation.

The research illustrates the most common business models in this industry. It draws attention to the difficulties posed by the neo-banking "partnership model," which has gained popularity in India as a result of a regulatory gap and the absence of a digital bank licence.

While releasing the report,  CEO Parameswaran Iyer said, this research checks the current gaps, the niches that remain underserved, and the global regulatory best practises in licencing digital banks in light of the necessity of efficiently harnessing technology to meet India's banking demands.

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