Suggestions on digital-only banks came with risks, RBI has no proposal on that: Governor Das

RBI Governor Shaktikanta Das (File image)

The Reserve Bank of India (RBI) currently has no proposal for digital-only banks as suggestions on the same came with certain risks, the central bank's governor said on June 17.

“We had received suggestions on digital bank, but we felt that the idea came with certain risks with it. So we have therefore, not accepted it at the moment,” Shaktikanta Das said at an event in Mumbai.

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There is also no proposal to regulate neo-banks currently, said the RBI head. Banks and non-banking finance companies should use technology for financial service delivery, he added.

In November, top government think-tank Niti Aayog had suggested a three-step process for neo-banking platforms to finally acquire a full-stack digital banking licence and said these entities can eventually be allowed to offer lending, deposits and other banking services to medium, small and micro enterprises (MSMEs).

The suggestions followed recommendation from a working group under the Reserve Bank of India (RBI) to regulate digital banking. The suggestions cover the new wave of neobank fintechs, which work with partner banks and serve as a technology layer for customer acquisition and banking activities for those banks.

These neo-banking platforms include start-ups such as Open, Jupiter, RazorpayX, Fi, Freo and Niyo. In the absence of a banking licence, the neobanks cannot independently undertake banking activities like deposits and lending.

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Meanwhile, although the RBI was keeping a close eye on the players involved in distributing buy-now-pay-later products, it was not keen to regulate it just yet, Das also said today.