Author:Deepika Kothandaraman
Based on the recommendations of the committee headed by Mr. Nachiket Mor , the Reserve bank of
India released the guidelines for the setting up of payment banks.These banks can perform only
limited functions unlike the normal banks.The payment banks cannot involve in lending activities.
But these banks can facilitate the Government's mission to improve financial literacy and achieve
total financial inclusion.
The payment banks are expected to target labourers , low income households and small businesses and offer services at low transaction costs.It helps in connectivity in rural areas which couldn't be
accessed easily.These banks rely on technology to reach their customers and day to day payments can be done remotely. The use of high end technology will increase the scope of their business operations.
Further these banks are authorised by the RBI to sell other financial products like general insurance,life insurance and mutual funds.This helps in improving the insurance penetration in rural areas.The main advantage is the banking and transaction costs will come down due to the competition driven by these payment banks.
Moreover the arrival of payment banks will transform social welfare and subsidy schemes like LPG,
kerosene end fertilizer can be routed through payment banks which will enable direct payments to
the poor and eliminate fake recipients.After India’s previous experiments with different efforts
to improve financial inclusion, payments banks offer one promising way towards better financial access.
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