Bank Of India Acquires Rs 10-Crore Stake In ONDC: What Is It? How ONDC Plans To Help Local Merchants

ONDC protocols will help standardise a variety of operations — from cataloguing and inventory management to order management and order fulfilment.

Bank of India on Tuesday acquired a 5.56 percent stake, for Rs 10 crore, in Open Network Digital Commerce (ONDC). India’s primary weapon in tackling monopolistic practices of e-commerce giants such as Amazon and Flipkart, ONDC is a government initiative to enable open networks in digital or electronic commerce, with an aim to democratise the sector by allowing local merchants to sell their products and services without having to worry about unfair trade practices from bigger companies. In this article, we will take a detailed look at ONDC and what benefits it offers.

ONDC: Whose initiative is it? When was it incorporated?

ONDC is an initiative of the Ministry of Commerce and Industry, or more specifically its subsidiary, the Department for Promotion of Industry and Internal Trade (DPIIT). ONDC was incorporated in December 2021.

ONDC: What benefits does it offer to merchants?

As explained by the Minister of State in the Ministry of Commerce and Industry, Som Prakash, in a written reply at the Lok Sabha in April 2022, the ONDC aims to promote “open networks for all aspects of exchange of goods and services over digital or electronic networks.” So, what does that mean?

To put it simply, ONDC will help e-commerce switch from a platform-centric network to an open network. This way, local merchants will be able to make their products and services visible digitally and conduct transactions via an open network, and not be buried by big-money promotions from giants such as Amazon or Flipkart. 

ONDC will allow listings from across all segments, including the likes of grocery, hotel booking, food delivery, and more. 

As per Prakash, ONDC will work just like the unified payments interface (UPI) or even the hypertext transfer protocol (http) for online exchanges. At its heart, the platform will be open for all and simple to use.

“ONDC goes beyond the current platform-centric digital commerce model where the buyer and seller have to use the same platform or application to be digitally visible and do a business transaction,” Prakash explained. 

ONDC will be compliant with the Information Technology Act, 2000, and has also been designed to be compliant with the Personal Data Protection Bill, which was first introduced in Parliament in December 2019. 

The protocols of ONDC will help standardise a variety of operations — from cataloguing and inventory management to order management and order fulfilment. 

“Small businesses would be able to use any ONDC compatible applications instead of being governed by specific platform-centric policies,” Prakash said. “This will provide multiple options to small businesses to be discoverable over network and conduct business. It would also encourage easy adoption of digital means by those currently not on digital commerce networks.”

In terms of data, ONDC will not mandate any participants to share transaction-level data with the platform itself. There will be no compromise on confidentiality and privacy. 

ONDC is currently in its pilot stage. A nine-member advisory council — including the likes of Nandan Nikelani of Infosys and Vedanta Chairman Anil Agarwal — is working on the adoption of ONDC.

ONDC: Will customers see any benefit?

Thanks to ONDC, e-commerce could become more accessible and inclusive for regular customers, as they will have the ability to discover any seller, product, or service by using any compatible app — and not just depend on a handful of platforms to do so. 

For example, customers could choose to buy from their nearest available supply, or even have the liberty to choose any local business they prefer. 

ONDC: Who are the major stakeholders so far?

As mentioned, the Bank of India has acquired a 5.56 percent stake for an amount of Rs 10 crores, which in absolute terms amounts to 1 million equity shares for Rs 100 each. 

Apart from the State-run lender, other banks have also purchased stakes, including the likes of Axis Bank, Kotak Mahindra Bank, and the State Bank of India, each of whom has acquired a 7.84 percent stake in ONDC for Rs 10 crores. Additionally, BSE Investments Limited also acquired a 5.88 percent stake. 

Additionally, Microsoft also came onboard for ONDC, looking to introduce social e-commerce via an app in India. The Redmond tech giant plans to harness the ONDC network to launch a shopping app, which will help customers check out listings from a wide variety of merchants and discover the best prices out there.