Banks of India and banks of the three largest states of Maharashtra, Madhya Pradesh and Gujarat have agreed to provide all their customers with online banking services by the end of the year.
The companies will also have to establish online payments infrastructure and set up payment terminals for users.
India is one of the fastest growing economies in the world, with GDP expected to rise from around $30 trillion in 2016 to nearly $50 trillion by 2021, according to the World Bank.
Its banks are also in a precarious position as their large and fast-growing consumer and retail banking businesses are facing a lack of financing and are struggling to retain and attract customers.
In April, a consortium of banks and the National Payments Corporation of India (NPCI) agreed to set up a joint bank to facilitate electronic payments in India.
The Indian banks are now likely to be the first to provide their customers access to online banking in the country.
“India is an emerging market and we are determined to provide customers with financial freedom in the digital age,” Rajeev Dhawan, co-founder and chief executive of ICICI Bank, said in a statement.
“As part of our efforts to bring online banking to all customers, we have reached out to all the banks of our respective states and are committed to establishing an independent bank to enable our customers to access their banking services.
We are working closely with the central government and the states to ensure seamless access to banking services for all.”
The Indian government has promised to introduce digital payment services in India by 2020, but many of the banks have already been shut down and their payment systems are not yet operational.
The companies have not yet set up online payment terminals, which will need to be connected to the bank’s payment network to be able to process payments.
The announcement comes amid growing concerns about the health of the banking system.
In February, the Financial Services Regulatory Authority of India said its regulator would soon be issuing a warning on how to improve the quality of financial services in the coming months, but its decision has not been followed by the banks.
Indian banks are the only major Indian financial institutions that have not set up an online payment network.
The country’s financial regulators are also struggling to deal with the problem of non-performing loans, which have soared in recent years.
The RBI has been criticised for failing to act fast enough, particularly on loans from small businesses, and for not doing enough to tackle the issue.
In the past two years, India has been hit by a series of economic and financial crises that have been caused by a lack, or a lack-lustre, recovery in the global economy.
As part the new initiative, banks are expected to provide information to customers on how they can access their online banking.
This will be provided through a mobile app, according a statement by the Indian Banks Association.
The association said banks of Maharashtra and Gujarat will set up their own online payment system in the next three months.
A representative of ICBC, which owns ICICC Bank in Maharashtra, said the companies were working on this project as soon as they were aware of the plan to establish an independent online payment bank in India and also that they would launch this system by the close of the financial year.
According to the banks, the new banking services will be available on a single, seamless platform, which is expected to be available to all consumers.
ICICCI Bank is the biggest bank in the state of Maharashtra.