Page 40 - Banking Finance October 017

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category of bank called Payment Banks. RBI has mandated 18 months time to start operation i.e. upto Feb 2107. While
the Payment Bank to have minimum capital of Rs.100 Crore three entities have already backed out, only four entities-
and to use the word "Payment" in its name to differentiate Airtel M Commerce, Paytm, Fino Paytech Ltd & Department
it from other Banks. of Post have either started or soon to start operations.

The framework assign to Payment Do we need Payment Banks?
Banks As discussed above, payment banks are simply deposit tak-
ing institutions with no lending operations thereby allowed
They Can-
to open savings and current accounts. But doesn't a normal
Raise deposit of upto Rs.1 Lakh and pay interest on bank allowed to do that? Yes, but the difference is a pay-
these balances just like a saving bank account does. The ment bank can now be your mobile service provider, super
deposits are covered by the DICGC.
market chain or a non banking finance company.
enable transfer and remittances through a mobile
phone Bharti Airtel, with 20 crore subscribers, has nearly the same
offer services such as automatic payments of bills and number of customers as SBI. The transaction done through
purchase in cashless, chequeless transactions through mobile wallets have tripled over the last two years to
a phone Rs.2750 Crore. Payment bank may make the handling of
cash a lot easier. For example- you can transfer money us-
transfer money directly to bank accounts at nearly no ing mobile phone to another bank or to another mobile
cost being a part of the gateway that connects banks
phone holder and also receive funds through your device or
issue debit cards and ATM cards usable on ATM net- you can transfer the amount to PoS terminals at large re-
works of all banks tailer and take out cash.
offer forex services at charge lower than banks
These will be the entities with fever number of brick and
also offer card acceptance mechanism to third parties
mortar branches and mainly operating through digital plat-
such as the "Apple Pay"
form based mobile applications. Payment technologies have
proved hugely popular in other developing countries. In
Objective- Kenya, the most cited success story, Vodafone's M-Pesa is
The RBI expected payment banks to target India's mi- used by two in three of adults to store money, make pur-
grant labourers, low income households and small busi- chase and transfer funds to friends and relatives. In China,
nesses, offering savings account and remittance services mobile apps have mushroomed and started threatening the
at a low transaction cost. backward and inefficient traditional banks, so much so that

It hoped that payment banks will enable poorer citizens many customers have switched directly from cash transac-
who transact only in cash to take their first step into tion to banking through mobile apps.
formal banking.
It could be uneconomical for traditional banks to open How Payment Banks will affect the Tra-
branch in every village but the mobile phone coverage ditional Ones?
is a promising low cost platform for quickly taking basic
There may be four areas through which the dan-
banking services to every nook and corner of this coun-
ger is approaching to traditional banks-
try.
Payment banks may snatch now cost CASA deposit from
The innovation is also expected to accelerate India's normal banks
journey into a cashless economy.
Most remunerative remittance business could be taped
In Aug 2015, RBI granted 'in principal' approval to 11 enti- by Payment banks.
ties to set up Payment Bank including big names like Reli- The vast population in rural areas and low economic
ance Industries, Aditya Birla Nuvo, Tech Mahindra, Depart- strata people in urban areas could be put into its fold
ment of Post and Vodafone and Airtel M Commerce, giving by payment bank.

BANKING FINANCE | OCTOBER | 2017 | 39

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