OPINION: Payments Banks – A game-changing idea for financial inclusion in India
Friday, August 21, 2015
The financial system in India has witnessed marked changes since the time of liberalization. Banking has been one of the few sectors like IT, Telecom, pharmaceuticals and automobiles that have been performed very well since 1991. The success of banking and allied sectors can mainly be attributed to banking sector reforms and technological change. There have been many changes at the institutional and regulatory level that have lead to changes on the ground level functioning of banks. Some of the changes at the institutional and regulatory level have included greater openness and transparency in banking operations and services as well as various measures to induce competition within the sector. Among them, a greater participation from the foreign sector, as well as the private sector, have been game changers. The competition along with reforms has paved the way for a retail banking revolution of sorts with the usage of ATM's (Automated Teller Machines) becoming a household reality in India.
The dream of a truly banked society has eluded India. Some of the poorest people live in India and have remained outside the formal banking ambit. The prime minister's recent Jan Dhan Yojana has been aimed at greater financial inclusion. However opening and using the financial system for one's benefit are two different things. Nevertheless, a beginning has been made for greater financial inclusion and it is a step in the right direction.
The Reserve Bank of India has similarly granted an 'in-principle approval' to eleven private parties for 'payments banks'.