Page 33 - Banking Finance August 2023

ARTICLE

COMPELLING

NEED OF THE

HOUR: DIGITAL

BANKS

he structure of the banking system in India can issue deposits, offer payments services and not issue credit
T be broadly divided into scheduled banks, non- in any form, thus having no asset side of the balance sheet.
scheduled banks and development banks,
Small Finance Banksare full-fledged banks that focused
however during recent times banking evolved to
leverage low-cost deposits to lend to micro, small and
new horizon and changed into multi aspect branches of principally on lending to small businesses. SFBs could
banking. Payment bank, small finance bank, neo bank etc. medium sector enterprises and enable financial deepening.
concepts have been formalized.
Payments Banks Small Finance Banks
First it is important to understand the difference between
Are essentially narrow banks Have to maintain at least
payment bank & small finance bank (SFB) then only we will
that issue deposits and earn 50 % of the loan portfolio
be able to formulate whether these banks could successful
income from high quality in ticket size of Rs. 2.5
in filling void or have cemented their place in banking
liquid assets and fees from million and below.
industry or not.
distribution, aimed at
furthering financial inclusion.
Payment Banks (PB) were essentially "narrow banks" that
The focus was issuing safe 75% of the credit to
deposit as store for value sectors identified as
to unbanked customers and priority sector
About the author
offer payments services
on top of that account
Ajay Panday
eg. remittance
Senior Manager
Staff Training Centre, Powai Are also envisaged as Are envisaged to
Mumbai distribution points for leverage technology to

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