India’s Approach towards Open Banking

India’s Approach towards Open Banking

Over the past ten years, India has encountered an ambitious overhaul of its digital infrastructure through the development of the so-called “India Stack.” The primary objectives are to promote financial inclusion, which gives access to financial services, enhances services and benefits, and increases competition in the Indian financial sector. Earlier, the approach of India had success in promoting significant increases in the number of individuals with bank accounts and access to digital payment services among the unbanked population. Moreover, the above measures have set a substantial expansion of digital payments in motion. Also, with a more gradual advancement in the active use of new bank accounts. Therefore the stack comprises four layers of infrastructure and standards:

(i) digital identity

(ii) an inter-operable payments interface

(iii) digitalisation of documentation and verification

(iv) a consent layer

The Indian financial landscape

Financial services remained low in India until 2011, with only 35 percent of adults in India possessing a bank account, below the average of other emerging market economies. It was reported that only few adults saved or borrowed from a financial institution. Simultaneously, the public sector dominated the financial sector landscape, with 61 percent of banking assets held by public sector banks.

Financial Service Access and Intermediation in India

According to BIS, payments systems promoted financial inclusion by facilitating the smooth operation and provision of financial services. The payments system in India was gradually modernised in 2004 through the installation of the Real-Time Gross Settlement (RTGS) system and the passage of regulatory reform in 2007. However, its reforms empowered India’s central bank, the Reserve Bank of India (RBI), to regulate overall payment and settlement systems and provide settlement finality together with a sound legal basis for netting.

Launch of Aadhaar Digital ID

The Aadhaar identification system was launched in 2010. It is a digital identity infrastructure that only involves a low cost of operations entitled to Indian residents. Therefore, individuals obtain an identification number that is unique and linked to their biometric identifiers, including photographs, ten fingerprints, and two iris scans. However, twelve-digit numbers are randomly assigned at enrollment, ensuring that no information about a person is contained in the given number itself.  The motivating objective for introducing a national digital identity system was to facilitate the delivery of government services and lessen the leakages associated with its targeting. Aadhaar can authenticate individuals for various public and private services digitally. Thus reducing the possibilities of false identities and fraudulent claims to state benefits. The Aadhaar number can be used to authenticate an identity at any location, including online.

Expansion of Banking Access

Indian government launched a large-scale financial development program called the Pradhan Mantri Jan Dhan Yojana (JDY) in August 2014. Its objective was to supply banking services for all unbanked households in India and accessible to save accounts through a debit card and mobile banking. Within a year of its inception, 166 million accounts were opened and expanded with almost 384 million accounts till 2019. While 80% of the accounts opened reside in public sector banks and half of these accounts, have been opened in rural areas reported by 2018. An essential feature of the JDY was that bank accounts under this scheme could be opened using the Aadhaar ID. The introduction and expansion of the JDY tally with a period of a rapid increase in financial access. The percentage of adults with a bank account increased from 35 percent in 2011 to 80 percent in 2017. 


There is low banking intermediation in India, which is associated with a low level of financial market development. According to the World Bank, the unit cost of financial intermediation proxied by banks’ net interest margin has balanced about 3 percentage points in India during the past decade. Thus, the growth in digitalisation does not contribute to increased efficiency when the financial sector remains dominated by state-owned banks that account for 70 percent of assets in the nation’s banking sector. Well now can start sending money online from India to your loved ones staying abroad with ATL Money Transfer. With 3 easy steps your transfer will be complete. Also we have great exchanges and low fees so that do not have to compromise with your fund. To know more about us visit our website

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