Digital-only bank licences are redundant

The future of banking in India is unmistakably digital. But it needs digital-first banking done properly before digital-only

- SRINATH SRIDHARAN

INTHE PAST two decades, India’s banking system has undergone a profound transformation. Yet today, policymakers and industry evangelists have moved from improving digital banking to fetishising digital-only bank licences, as if a new label by itself will unlock customer-centricity, better competition among banks, credit, inclusion, and growth.

The real issue is not the licensing of a new kind of bank. It is whether our existing institutions, including public sector and cooperative banks, have exhausted their digital potential, and whether digital-only models solve any clearly defined banking problem that technology alone can solve.

Most banks in India are already digital. The physical branch has not vanished, but for millions of customers the everyday interface with their bank is already digital.

Yet the persistent failures of digital customer experience show how unfinished the transformation remains. For example, older processes that are not yet reengineered to be digital-first often become walls rather than bridges. Grievances escalate slowly. Customers still seek human accountability when systems and automated AI chatbots fail. A banking system cannot call itself digitally mature if the customer, at the moment of friction, finds only automation and silence.