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The Reserve Bank of India should allow fully digital version of small finance banks (SFBs) when it finalises guidelines for ‘on-tap’ licensing of such banks in the private sector, Naveen Surya, Chairman, Fintech Convergence Council, has suggested.
“SFBs will go ‘on-tap’ soon. We have to use this opportunity. It’s a great opportunity for the RBI to offer digital version of SFBs in the new guidelines. This could attract huge capital as a lot of people in the fintech community are interested in it (digital only SFBs). New people with new ideas and capital will come,” Surya told BusinessLine.
The RBI had in September this year come out with draft guidelines for ‘on-tap’ licensing of SFBs in the private sector. An ‘on-tap’ facility will allow the RBI to accept applications and grant licence for SFBs throughout the year.
Also read: `On-tap’ licensing of small finance banks: Will payments banks go for it
Surya said Singapore and Hong Kong have already started issuing licences for fully digital banks. “SFBs are a perfect model to go fully digital. Timing-wise, it works because more or less every country has it. This can be started without too much groundwork required. The whole world is talking about neo bank, digital bank and virtual bank licences,” he said.
Neo bank vs digital bank
Surya said Neo Bank, which does not need licence from the RBI, is already happening in India. It is different from a digital bank. Neo bank is just a digital version of business correspondents (BCs).
“People get confused between neo bank and complete digital bank. A neo bank is more about doing activities on behalf of another bank in a digital way – activities are digital but not as an independent bank. It's like a BC operation in a digital world.
Neo bank is all about interfaces, delivery of services and digitizing banking services by third parties. If banks can't digitize, they let the third party do it for them. Digital banking is direct bank access channel without intermediaries,” Surya said.
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