Technology and the internet have revolutionized industries in ways that would have been unimaginable a decade ago – and now they have come for banks. Many neo banks offer features such as instant account opening, AI driven insights into spending, and payroll management – essentially solving for inefficiencies and making banking more convenient. Unlike traditional banks, which are authorised and regulated by the Reserve Bank of India (“RBI”) – neobanks are not directly regulated. Neobanks operate by tying up with regulated banks to offer over the top services, on top of their partner banks’ regular banking services.
There is a common misconception, however, that neobanks operate in a regulatory vacuum. Banks are required to adhere to and impose stringent outsourcing obligations when partnering with neobanks. Requirements include continuous monitoring, data security and grievance redressal obligations, and regular audits. The RBI also has the right to access neobanks’ accounts and transaction records.
Please click here to read the full article by Probir Roy Chowdhury and Nikhil George, published in BW Legal.
Probir specializes in Corporate Commercial, Venture/Private Equity and Information Technology/FinTech. He has been involved in corporate transactions focused on the high technology industry including cross border Mergers & Acquisitions.