Thursday, August 20, 2015

Excellent Article on payment Banking

An Outstanding article. Read each line carefully to realize the impact.

Key Points:

1. 11 private partied have been given licenses to set up "payment banks".

2.  The only thing they can't do is lend to common public. Payment banks can only lend to the government. So Payment banks will have zero loan defaults because Governments do not default.

3. Any one with 100 cores in his / her kitty can set up such a bank. There are few other norms (not being a crook / not flouting regulatory norms previously etc.)

4. So the number of such banks is likely to increase.

5. Who all have got licenses:  Aditya Birla Group, Reliance Industries, Airtel, Vodafone, the National Securities Depository (which holds almost all of India’s stocks in demat form, and provides the backbone for a tax information network), PayTM, Tech Mahindra, and Sun Pharma’s Dilip Shanghvi

6. Why is this a big deal for customers??

a) Payment banks will have greater penetration and can reach upto remotest customer. These banks will rely on technology to reach payment services to all customers, using mobiles as the vehicle of banking. The mobile phone will become the virtual ATM and small-payments cheque-book.

b) Competition will increase. banks will vie for deposits. Above-limit ATM transactions, additional cheque-books, big money transfers, maintenance of minimum balances, or draft issuance fees: all these will either wither away or get reduced.

c) Payment banks may offer higher savings bank rates of 5-7 percent (to get more deposits).

d) Social welfare and subsidy schemes will have a much better reach through these banks.  The difference between State Bank and Airtel is simply this: both have over 200 million customers, but Airtel can go where State Bank cannot with a branch.

e) Increased mobile banking will create conditions for cash-less banking. This means, over time, the mobile will perform the same role as credit and debit cards, obviating the need for too many cash payments. Black Money will be reduced.


  1. This is a great steps taken.
    hope it will be running successfully all over India

  2. In the 3rd point it mentioned that any individual having 100cr can setup bank.Suppose any individual does not have that much money and he/she decided to tieup with some partner to setup bank does it allow to do so.