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What is the news?
NITI Aayog has released a Discussion Paper titled “Digital Banks:A Proposal for Licensing & Regulatory Regime for India”.
About the Discussion paper
The Discussion Paper makes a case, and offers a template and roadmap, for a Digital Bank licensing and regulatory regime for India.
The paper has been prepared by NITI Aayog, in consultation with eminent experts in the field of finance, technology and law and based on inter-ministerial consultations.
What are the reforms proposed by the paper?
Digital Bank licensing: The paper proposed a Digital Bank license for solving as well as mitigating the financial challenges faced by India.
Digital Bank Regulatory Index: Paper recommends constructing “Digital Bank Regulatory Index” comprising of 4 factors: Entry barriers; Competition; Business Restrictions and Technological Neutrality. It maps the elements of these indices against the 5 benchmark jurisdictions of Singapore, Hong Kong, the United Kingdom, Malaysia, Australia and South Korea.
Two-Stage Approach: It recommends a two-stage approach – a digital business bank license to begin with, followed by a Digital (Universal) Bank license after policymakers and regulators have gained experience from the former.
Inclusive Approach: It focuses on avoiding any regulatory or policy arbitrage and giving a level playing field to all the stakeholders.
Source: This post is based on the article “ NITI Aayog Releases Discussion Paper on Digital Banks Seeking Comments” published in the PIB on 24th November 2021.