Payment bank's revolutionary storm towards Indian Banking System

Abstract

Payment Banks (PBs) focus on small deposit holders and mobile banking will add to the competitive pressures of public sector banks and could potentially pose risks to their market share over the long-term. Increasingly, with the lunching of products or new applications by these banks, instead of cash, people will start carrying out more transactions electronically. Now it is the trend in globally. But in India, increasing of users of credit and debit cards, it has been limited because of the costs involved for merchants or establishments which accept these cards. The PBs would position by them to do this. RBI Governor has flapped the wings and set off what could turn out to be a revolutionary storm in the Indian banking system a storm bigger than created when private banks were first given licences in the 1990s. PBs and small banks will make Indian banking more competitive and more inclusive on both the assets and liabilities sides for both depositors and borrowers. The era of the consumer is finally at hand. The RBI has given in principle approval for 11 entities to set up PBs. The move has been touted as a harbinger of a revolution in the Indian banking sector. The success of the PMJDY will be another big challenge that these banks will need to tackle. It is believed that 99% of households have been covered under the scheme. However, with a large number of these numbers of those accounts still inactive, there is opportunity for PBs to get business. According to the PMJDY website, as on 26th August, 2015 178.9 million accounts have been opened under the scheme, but about 45% of them are inactive. Therefore, the existing paper discusses the objectives, scope and regulation of PBs.