The National Institution for Transforming India has outlined a licencing and regulatory scheme for digital banks that works to cut down on any regulatory or policy arbitrage and provides a level playing field for the incumbents as well as competitors.
The think tank of India, NITI Aayog, in a report titled “Digital Bank-A Proposal for Licensing and Regulatory Regime for India”, has recommended a proposal to issue a restricted digital bank licence to these financial entities.
Four factors shall be considered for the licencing and regulatory template, i.e., entry barriers; business restrictions; competition; and technological neutrality.
75 digital banks are to be set up in 75 districts of the nation by the scheduled commercial banks to mark the 75th independent year of India, moving forward with the agenda of fintech innovations.
It outlines the challenges presented by the partnership model of the neo-banking model in India, which has emerged as a result of the regulatory vacuum and absence of licence in digital banking. The report also mentions the need for leveraging technology for the needs of baking in India, and the report also analyses the niches that are underserved. In recent years, the Pradhan
Mantri Jan Dhan Yojna has contributed to furthering financial inclusion for the unserved.
Credit presentation remains a challenge for the nation’s MSMEs, which account for 30 per cent  contribution to the GDP, 45 percent of the manufacturing output, and 40 percent of exports, and also an employment opportunity for a significant population.