Solution

The NITI Aayog suggested a roadmap for the setting up of full-stack digital business/consumer banks to deepen the access to financial services in the country. The think tank also recommended a carefully calibrated three-step approach for digital bank license by the Reserve Bank of India (RBI). · In the first phase, a restricted digital bank licence should be given to an applicant with restrictions in terms of volume/value of customers serviced and the like. · In the second stage, the licensee will be put in a regulatory sandbox framework by the RBI. · Finally, issue of a ‘full-scale’ digital bank licence will be contingent on satisfactory performance of the licensee in the regulatory sandbox, including salient, prudential and technological risk management. In the policy paper, the NITI Aayog said upon progression from the sandbox with an initial capital of Rs 20 crore into the final stage, a full-stack digital business/consumer bank will be required to bring in Rs 200 crore capital (equivalent to that required of the Small Finance bank). ‘Digital banks’ or DBs referred to in the paper means banks as defined in the Banking Regulation Act, 1949). In other words, these entities will issue deposits, make loans and offer the full suite of services that the Act empowers them to. As the name suggests, DBs will principally rely on the internet and other proximate channels to offer their services and not physical branches.