State Bank of India (SBI), the country’s largest lender, has invested ₹10 crore to acquire 7.84% equity stake in Open Network for Digital Commerce (ONDC), an open-source e-commerce platform. Established on December 30, 2021, ONDC is a first of its kind initiative of the Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, to democratise digital commerce, moving it from a platform-centric model to an open-network platform.
SBI is the second public sector bank to buy a stake in ONDC. In November last year, Punjab National Bank (PNB) had proposed to invest as a promoter in ONDC by picking up a 9.5% stake in the company. The lender had said it would invest ₹25 crore in ONDC or acquire 9.5% equity capital, whichever would be lower.
SBI in an exchange filing on Tuesday said that it has subscribed to 10 lakh equity shares of ONDC of the face value of ₹100 each fully paid up. “The equity ownership of ONDC is aimed at providing an open public digital infrastructure to develop and transform the Indian digital commerce ecosystem for both goods and services,” the PSU lender said in the filing to BSE.
The state-owned lender said that the transaction does not require any regulatory approval as the acquisition of shareholding was below 10%. “The transaction of acquisition of shares does not constitute a related party transaction. As on date, the bank’s promoters do not have any interest in ONDC,” it said.
SBI further stated that the bank and its subsidiaries, in the ordinary course of business, may have business dealings with ONDC at an arm’s length.
What is ONDC?
Open Network for Digital Commerce (ONDC) is a government initiative to create an open public digital infrastructure to develop and transform the Indian digital commerce ecosystem for both goods and services by increasing its reach to every individual and business enterprise. What UPI is to the digital payment domain, ONDC is to e-commerce in India, which intends to compete with large e-commerce companies such as Amazon and Flipkart.
Formed on December 31, 2021, ONDC is a private sector non-profit company that aims to ensure that small retailers get an equal opportunity to engage with big firms, protect their businesses and serve customers with modern ways of delivery system. The government-backed platform intends to increase the ease of doing business online and to expand alternatives for both buyers and sellers to engage in the digital commerce space.
How will ONDC work?
As per the commerce ministry, ONDC will empower merchants and consumers by breaking silos to form a single network to drive innovation and scale, transforming all businesses from retail goods, food to mobility. The government has rolled out a detailed procedure for the functioning of the platform which aims to ensure confidentiality and privacy of data in the network.
"It shall not mandate sharing of any transaction-level data by participants with ONDC and work with them to publish anonymised aggregate metrics on network performance without compromising on confidentiality and privacy," as per the ministry.
"ONDC will be compliant with the Information Technology Act, 2000 and designed for compliance with the emerging personal data protection bill," it said in a release.