In past few days, internet news agencies and newspapers have been conveying many stories about payment banks. As it is a newly popularized concept for the first time in India, so not have everyone heard about it before. Nonetheless, nowadays almost the whole public is talking about these advanced type of banks.
The objectives of setting up payments banks are inclusion to further financial support by providing; payments/remittance, small savings accounts and services to workforce migrant labor, small businesses, low-income households and other unmanaged sector entities.
BACKGROUND TO INDIAN “PAYMENTS BANKS”
The word “Payment Banks” is new and implied as invented in an Indian context. In September 2013, was given by the RBI. The NachiketMor committee proposed its final report in which one of its proposition was the construction of a new category of banking called payments banks By January 2014.
The above was accompanied by the announcement about Union Budget 2014-2015 (presented on July 2014) in which it was decided that “After making suitable changes to the current structure, a scheme will be placed for the endless legalization of universal banks in the private sector on current economic year”. RBI will set up a structure for offering the license to other differentiated banks and small banks.
Taking clues from the Budget, RBI pursued the complete drafted guidelines in July 2014 itself on small banks and payment banks as restricted or differentiated banks. RBI came out with final guidance for Payment Banks in November 2014 and started working on the applications form entries of those who are interested in starting such banks.
EMERGING PAYMENT TECHNOLOGIES
The payments banks industry is continuously noticing technological advancement and rapid growth. The payments banks industry is adapting new technologies to become more efficient, dynamic, and cost-effective. The use of the electronic and online mode of payments for the purchase of services and goods. Making payments to public utility association is becoming rapidly popular as well.
New payment methods or technologies that are emerging continuously. Including biometrics; emerging network technologies, near field communication (NFC), prepaid stored value cards, online person-to-person (P2P) payments, general spend reloadable cards, electronic cash, account-to-account (A2A) payments, Internet, mobile, mobile card acceptance, contactless payments, and much more other technologies.
Mobile phones and Smart cards are also providing new channels for reaching unbanked rural as well as urban households. Different government individuals are trying to examine the smart cards as the route payments for the government’s National Rural Employment Guarantee Scheme (NREGS) for the labors of rural areas.
ACHIEVE FINANCIAL INCLUSION OBJECTIVES
Even though making it mandatory for universal banks to open priority sector lending and rural branches, along with other forms of banking like regional rural banks and cooperative banks, somehow approximately half of the population is still unbanked.
The payments bank is an exposed version of banking that can help to address the problems as the manageable requirement for capital. It is also relaxed form of banking and they provide the latest technology to offer low-cost solutions.
REDUCE STATUTORY LIQUIDITY RATIO (SLR) BURDEN ON COMMERCIAL BANKS
Unlike in the west, there is a huge burden on Indian banks to par 21.50 percent of their depositor funds in Statutory Liquidity Ratio (SLR). The limit is too large and narrow banks’ ability to supply the beneficial sectors of the economy.
This scenario could be changed by payments banks if they succeed. According to the definition, payments banks are authorized to accept deposits, but not a loan. They have to mandatorily invest in government securities. If payments bank becomes more successful and large, the government’s G-sector demands will be consumed by them, this will help to remove the burden from commercial banks.
CHECK ON BLACK MONEY
India is principally a cash economy. This creates a major headache for the regulators or government to catch the offenders. The biggest advantage of payments banks is that the digital cash will provide electronic footprints, which will help the tax legal to go after the evaders that hides their black money by Swiss banking.
Payments banks were just introduced a couple of years ago in India. But they are becoming the common way of banking for locals of rural as well as urban areas. They are providing a great help for the locals keep and transfer their money safely beyond expectations. According to its current popularity in very short duration of time, it is sure it will be the mark of success in no time.