Payment Bank: A Catalyst for Financial Inclusion

Abstract

The study investigates how newly licensed payment banks can favourably achieve inclusion goals of the Indian banking regulator by engaging with marginalised and migrant groups within the population pie, as envisaged by the banking regulator. The role of digitisation in making basic financial services available to such excluded groups has been explored within the study. In addition, the article attempts to critically assess the competitive implications such a new financial institution will have on the existing full-service banks. The study is grounded on the concept of payment banks as a crucial cog in a differentiated banking regime. Secondary information extracted from occasional reports/working papers of Reserve Bank of India (RBI) has been used to gauge the efforts towards realising inclusion goals. Perspectives of CEOs and banking practitioners have provided valuable inputs as to how the banking fraternity views payment banks and perceives them as a competitive threat. As the payment banking business model necessitates forging alliances with full-service banks, implications of such strategic alliances warrant research. The present study is an initial attempt to fill this gap in the extant literature.