Page 39 - Banking Finance February 2018

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entities in the financial sector, active collaborations are seen
between banks.

Many incumbent banks have already announced tie-ups with
the new payments banks. Hitherto financial inclusion was a
compliance requirement to fulfill government mandate and
social agenda, and would typically get relegated to a stand-
alone department in the bank trying its best to do what was
possible. This has now changed and sustainable business
strategies with latest innovations in technology are being
debated, presented and implemented. Reaching out to
untapped segments in rural areas and small towns, by using
new business models is now considered the next big
opportunity for the financial sector and are actively
engaging in it.

revolutionary storm in the Indian banking systems. It is The revolution of Indian banking has begun and not only the
expected that the new entities will bring in scale, technology common masses would be the biggest beneficiary of this,
and expertise incremental to the existing institutions in the government will also one of the biggest beneficiaries,
as these banks will expand its access to cheap funds.
banking and therefore, the landscape would change
dramatically in the future. Bank depositors can expect to earn higher short term
deposit rates and the old 4 % savings bank norm probably
The entry of MFIs in the small finance bank segment is a fade away. These niche and differentiated banks will make
revolutionary step since these entities are well familiar financial inclusion more complete from the small
with nuance of banking with the poor borrowers . After a borrower's point of view. Payments banks and SFBs will
series of setbacks like the recent with drawl of three "in- make Indian banking more competitive and more inclusive
principle" licence holders , eventually leaving only eight in on both the assets and liabilities sides, i.e for both small
the fray -the concept of payment banks seems to be finally depositors and borrowers , thus making banking more
inching closer to reality. affordable and reachable for the common man.

Payment banks will bridge the last mile between bank References
branches and the remote customer living in a rural hamlet.
1) RBI Guidelines for Licensing of Small Finance Banks in
Banking costs will come down due to intense competition
the Private Sector dated Nov 17,2014
driven by the expected proliferation of these banks The
2) RBI Guidelines for Licensing of Payments Banks dated
arrival of these banks will transform social welfare and
Nov 17, 2014
subsidy scheme. Mobile banking will create the conditions
for cash less banking. ATM expansion may be slowed down 3) RBI grants "In-principle" Approval to 10 Applicants for
in cities and may be focused on distant villages or towns. Small Finance Banks dated September 16,2015
4) RBI grants "in-principle" approval to 11 Applicants for
The threat of impending competition from differentiated Payments Banks dated August 19,2015
banks has awakened incumbent banks to look at liabilities
5) RBI Bulletin - Composition and Ownership Pattern of
and payments as a separate business and not just as a source
Deposits with Scheduled Commercial Banks: March 2014
of liquidity and facilitating transactions. The focus of the
dated March 10, 2015
banks is shifting from the stock of balances in accounts to
6) RBI Bulletin -Payment system Indicators dated December
the flow and velocity of payments by customers. In the past
10,2015
six months many large banks have launched a slew of
payments focused apps and services. With new kinds of 7) RBI - Handbook of Statistics on Indian Economy.
BANKING FINANCE | FEBRUARY | 2018 | 39

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