Neo Banks – Is it even Legal?

[User_bd8d8cff]

U

User_bd8d8cff
PARTICIPANT
March 17, 2025 at 8:03 am

1) Are Neo Banks legally approved?

2) On what basis, they operate and they freeze the accounts?

3) Is it legal to run a bank without physically located in anywhere in India ?

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[Lakshmiwolf510]

L

Lakshmiwolf510
PARTICIPANT
March 17, 2025 at 8:08 am

1. Yes
2. Neo banks partner with RBI approved “real” banks like Federal Bank, SBM Bank, etc
3. They do not have a physical operating space however you can visit any branch of the partner bank to ask your query

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[User_ceeef041]

U

User_ceeef041
PARTICIPANT
March 17, 2025 at 9:50 am

yes they have a physical operating space.

for my jupiter account(federal bank) there is one physical branch in Kerala that is just reserved for it. I think its for regulation purpose

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[Jahnvihawk939]

J

Jahnvihawk939
PARTICIPANT
March 17, 2025 at 9:55 am

They do not have the banking charter yet to operate solely as a bank.

Instead they aornter with already established banks like federal bank to provide peripheral banking services.

Given then don’t have a banking charter they can’t take deposits and borrow lens money like a traditional bank does. That happens on the basis of the licenses which their partner banks have.

So these banks don’t profit from interest spreads and other typical banking instruments
They can only profit from commisions on their peripheral services like mfs , instant loans etc

Federal bank (eg) collects the profits on spreads over deposits , even if you deposit via a Neo bank (eg fi money)

Your money is also protected by the standard insurance of 5l cap which is given by RBi

Regarding physical presence, that’s not a necessary condition.
DBS launched in India completely via the online route. They have physical branches now. dBS is not a Neo bank by the vague definitions of Neo banking. But it’s extremely similar and it has a banking charter

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