Raise payments bank licence threshold to Rs 100 crore: Nasscom

The technology industry has told Niti Aayog that the threshold to apply for a payment bank licence should be increased to Rs 100 crore, from Rs 20 crore that the government policy think tank had recommended, to deter casual or trivial applications, and give consumers “an assurance that their deposits stay safe.”

It said companies should have a minimum paid-up capital of Rs 100 crore to apply for the licence, IT industry body Nasscom said in its feedback on a discussion paper for Digital Banks.

Nasscom also said that instead of creating a new licence category, a better regulatory approach could be to enable any bank to become a “digital bank.”

The Rs 100 crore entry barrier will also demonstrate that the company has the capacity to make necessary investments in technology, infrastructure, governance, and compliance, it said.

Niti Aayog’s discussion paper, which offers a template and roadmap for digital bank licensing and regulatory framework in the country, was released in November.

“The goal should be to set out standards that apply across the board, instead of creating a differentiated regime for just “digital banks”. After all, in the future, we envisage every bank going digital…,” Nasscom said.

The RBI could revise and update existing regulations that are no longer relevant considering new digital technologies and their applications. RBI’s Internet Banking Guidelines, 2001 and its Rationalisation of Branch Authorisation Policy are two such examples that may be revised, it said.

“These may be reassessed to permit banks to have more flexibility in determining the extent of their physical presence and otherwise revamped to account for new internet-based channels and new technologies to build technology stacks such as microservices architectures, Open APIs, cloud computing, or data analytics,” Nasscom said.

In its paper, Niti has argued that India’s success on the retail payments and credit front, has not been replicated in the payments and credit needs of its small businesses. The current credit gap and the business and policy constraints reveal a need for leveraging technology effectively to cater to this segment and bring them within the formal financial fold. The paper, therefore, examines the global scenario, and recommends a new segment of regulated entities – full-stack digital banks.

According to the paper, the “infrastructural enablers” for it in terms of a national ID, credit information architecture (credit information companies), a

real time payments protocol (UPI), and an emerging open banking regulatory framework (account aggregators) are already present.

“India has the opportunity to leverage these enablers to enact an industry leading regime for governing digital banks,” the paper said.

The government should clearly distinguish between a “full-stack digital business bank” and a “full-stack digital universal bank”.

“It may be simpler to have one concept—a “digital bank” licence and have different phases to define them with clearly specified financial thresholds for both,” Nasscom added in its submission.

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