February 28, 2017
Reserve Bank of India (RBI) granted ‘in-principle’ approval to 11 payments banks in August 2015. By the end of 2016, three had already dropped and timelines for others were hazy, creating doubts on the success of this seemingly progressive experiment of RBI.
The year 2017 began with a good omen, though. Airtel payments bank and India Post payments bank (IPPB) have commenced operations, Paytm is slated for August launch and Fino PayTech is tentatively confirmed for 2017 end. Although the news from Reliance (along with SBI) is still ambiguous, NSDL is still sticking to its launch date of ‘very soon’ for long and the recent talk of Idea and Vodafone merger creating doubts on their plans (both have payments bank approvals). For 2018, my hope is four to five payments banks would be operational across the country. Considering the challenges for payments banks, it’s still good news.
The verdict on the viability of payment banks varies, depending on whom you speak to. While the critics would easily fault the regulatory framework, even the strongest advocates would concede that payments bank isn’t a cakewalk. It necessarily needs a new, innovative approach. Innovation, in turn, requires creativity. And creativity is in some ways an antithesis of banking!
The road to building a payments bank is not only less traveled (considering this is one of a kind experiment) but is likely to be bumpy.
On paper, the concept of payments bank kills two birds with one stone. Firstly, it gives an impetus to the financial inclusion initiative by widening the d ...