Page 43 - BANKING FINANCE November 2015 ONLINE

ARTICLE

SPECIALISATION
IN BANKING -
PAYMENT BANKS

T he Reserve Bank of India's latest initiative of *An important early (1776) description of processes
introducing 'Payment Banks' finds resonance was that of Economist Adam Smith in his famous
with Economist Adam Smith's Theory* of example of a PIN Factory. Smith described the
employing Division of Labour to exponentially production of a PIN in the following way:
increase productivity. The new Business Model adopted
will create a revolutionary trend in the Indian Banking "One man draws out the wire, another straights it, a
Industry and will accelerate Government's Mission of third cuts it, a fourth points it, a fifth grinds it at the
improving Financial Literacy and achieving Total Financial top for receiving the head: to make the head requires
Inclusion (TFI), both vital for a country's Economic two or three distinct operations: to put it on is a
Development. particular business, to whiten the pins is another ...
and the important business of making a pin is, in this
About the author manner, divided into about eighteen distinct
operations, which in some manufactories are all
CMA Dr. P. Siva Rama Prasad performed by distinct hands, though in others the
30 Years of Bankings Experience and 6 same man will sometime perform two or three of
Years of General Insurance Experience. them."

Fellow Member of the following Professional Smith also first recognized how the output could be
increased through the use of labor division.
Institutes: Previously, in a society where production was
dominated by handcrafted goods, one man would
-The Institute of Cost Accountants of India, Kolkata perform all the activities required during the

-Institute of Company Secretaries of India, New Delhi

-Indian Institute of Banking and Finance, Mumbai

-Insurance Institute of India, Mumbai

and Member of All India Management Association, New
Delhi.

BANKING FINANCE | NOVEMBER | 2015 | 43

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