What changed
RBI formalised a comprehensive framework for Local Area Banks to offer digital banking channels, replacing earlier ad-hoc approvals. The directions define eligibility criteria, prudential requirements, and technological guidelines for view-only and transactional digital banking facilities.
What it means for you
Local Area Banks now have a clear regulatory pathway to launch digital banking services, but must first meet core infrastructure prerequisites like CBS and IPv6 compliance. View-only services can be started with intimation to RBI, while transactional services will need explicit authorisation. This levels the digital playing field for smaller banks but imposes compliance costs.
What you must do
- Ensure your bank has implemented Core Banking Solution (CBS) and enabled IPv6 on public-facing IT infrastructure before offering any digital banking channel.
- Draft a comprehensive digital banking policy covering liquidity and operational risk management as per statutory requirements.
- Intimate RBI through the PRAVAAH portal before commencing view-only digital banking facilities.
- Apply for separate RBI authorisation before launching transactional digital banking facilities.
Who it affects
Local Area Banks (LABs), IT and compliance teams of LABs, Customers of LABs seeking digital banking services
When do these directions take effect?
The directions come into effect from January 1, 2026.
Can a Local Area Bank offer transactional digital banking without prior RBI approval?
No. Transactional banking facilities require explicit authorisation from RBI. Only view-only facilities can be started after intimating RBI via the PRAVAAH portal.
What is the minimum IT requirement to offer view-only digital banking?
The bank must have implemented Core Banking Solution (CBS) and enabled its public-facing IT infrastructure to handle Internet Protocol Version 6 (IPv6) traffic.