Payment systems: India
This is a collection of articles archived for the excellence of their content. |
What are payments banks?
The RBI has 'in principle' cleared 11 entities — including department of posts, Reliance Industries, Aditya Birla Group, Airtel, Vodafone, and a number of tech and finance companies — to set up 'payments banks'.
1. Payments banks have differentiated licences with limitations on what they can do.
2. RBI norms limit demand deposits to a maximum of Rs 1 lakh.
3. They cannot provide loans or accept term deposits.
4. The deposits raised by them will have to be invested in government bonds and a maximum of 25% can be invested in an account with another bank.
5. Payments banks can sell insurance and mutual funds.
How will they function?
1. Payments banks will largely depend on mobile and ATM infrastructure to provide banking services.
2. Opening an account is expected to be like acquiring a pre-paid mobile number.
3. Analysts expect tough competition to drive down charges for fund transfers and other transactions.
What does it mean for customers?
1. Service charges will come down.
2. The requirement of minimum monthly/quarterly balance is unlikely to be applied.
3. Competition from these new entities will force existing banks to offer low-cost (or low balance) basic accounts.
4. Payments banks will spread the reach of banking to rural areas.
5. The payment banks will cater to the needs of small savings accounts, remittance services, low income households, small businesses and other unorganized sector entities.
6. The payments bank licence will enable the network of 1,54,000 post offices (including 1,30,000 rural post offices) to offer banking services to the masses in the country.
