Payment banks have the potential to provide last mile connectivity for better financial inclusion in the country. Examine (200 Words)
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IAS Parliament 3 years
KEY POINTS
· The Reserve Bank of India laid down the framework and licensed ‘vertically differentiated banking systems’, such as Payments Bank (PBs) and Small Finance Banks (SFBs).
· PBs have shown strong growth in revenues, while operating at a larger scale than SFBs. The high-tech PB model has shown more rigour than the cost-heavy branch-based SFB model in terms of its impact on inclusion.
To realize their full potential
Liabilities
· PBs can take deposits only up to Rs 1 lakh, which limits their ability to augment profit that can be further deployed to enhance efficiencies.
· MSMEs are rapidly formalizing, an outcome of policy reforms. PBs could offer a differentiated current account, with limits adequate for small business needs.
Assets
· PBs can evolve new micro-lending models through their Business Correspondent networks and mobile apps and create an alternate credit score for these consumers.
· Allowing micro-lending by PBs could be a starting point. Thereafter, regulators may consider a transition path for them to become SFBs, or even Universal Banks.
Way forward
· We must remind ourselves that there is no one-size-fits-all solution to achieve complete financial inclusion for the diversified needs of our people. An enabling framework needs to be in place. Payments Banks, in particular, have the potential to bridge India’s financial inclusion gaps.
aswin 3 years
Please review
IAS Parliament 3 years
Good attempt. Keep Writing.
Dev 3 years
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IAS Parliament 3 years
Good attempt. Keep Writing.
