Page 41 - Banking Finance October 017

ARTICLE

That is just prima facie, imagine the disruption it will create ing person looking for a plush office to transact. But it can-
in banking industry if the payment bank of Airtel with more not be ignored as it came from none other than former RBI
than 20 crore of customer base decides to convert itself into governor Raghuram Rajan.
full fledge bank.
Many bankers believe that all the problems PSBs face is
Well, what will be impact of payment banks entry on nor- related to capital because of stretched Govt finance and bad
mal banks. loans that have piled up due to state induced loans to infra-
structure sector following the credit crisis. But the problem
The impact on private banks will be minimal because they with PSBs runs a lot deeper. PSBs have forever been focus-
have already made strong investment in technology. Also ing on increasing the size of their lending and deposit with
some of the private banks like Kotak Mahindra, Yes Bank much attention to profitability, customer service, technol-
and ICICI Bank have tied with some of the companies that ogy and just the sheer ease of transacting. Hardly there is
have got approval for setting up payment banks and hence any strategy to capture market share which is the need of
will not be affected much. Moreover lower strata people the hour and also that should be the parameter to gauge
and remittance has never been the potential area perceived the performance.
by private banks.
Data from India Ratings and Research shows that share of
Whatever may be the loss that will be entirely born by PSBs PSBs in the total advance has been falling in the past five
accruals or future accruals? Out of PSBs also, large PSBs have years standing as on Mar15 at 71.60% from 79.80% in
or will very probably tie up with entities that have received Mar10 and CASA deposit at 72.90% as on Mar15 from
payment bank approval. So the impact will be less on large 78.40% on Mar10. Private Banks with offerings of customer
PSBs and more on mid and small PSBs as incremental de- convenience in transactions have been steadily growing their
posit growth and market share will under pressure due to CASA share to 25.40% in FY15 from 21.60% five years ago.
payment banks, especially in rural and semi urban areas.
"It is not that PSBs do not realise this, but it is a question of
Post offices has long been trusted for long term deposits and how quickly they got their strategy, it is a dog eat dog
by offering CASA deposit, they could potentially cannibalize world."- said SBI chairperson Arundhati Bhattacharya re-
PSB's CASA share in rural markets which make up around cently.
90-95% of the CASA deposits. PSBs could also lose out from
business correspondents. Fino PayTech Ltd, one of the larg- As we can see that the two factors which paves the way for
est BCs, with an established rural network and now a pay- new entrants in banking industry are- one is the vast and
ment bank licence in hand will create strong competition untapped population (mostly in rural areas) and the low
for PSBs in rural areas. economic strata people which is still not having access to
any formal financial system and second is the availability of
Payment bank could also start offering competitive deposit technology to tap this market. Till lately this segment
rates of as high as 6-7% to lure customers. Besides the couldn't be taped for the reason that there was no such cost
threat to CASA deposits, competition for PSBs will intensify
as payment banks which are backed by digital platforms,
adequate capital, low cost innovative and convenient ser-
vices, will compete heavily for liabilities in rural and semi
urban areas. There could be loss of market share in payment
transactions and government transfers too.

Can we take on Payment banks- How?
"If you enter in a public sector bank branch, you don't know
which bank branch it is unless you see the logo"- Had such
a comment come from just another customer with a sav-
ings account, it could be ignored as coming from a demand-

40 | 2017 | OCTOBER | BANKING FINANCE

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