You can already see smartphones and virtual wallets being used to pay for things like taxis and food delivery. Recently though, the Reserve Bank of India (RBI) has published guidelines for Payment Banks. This could well help bring a vast section of the previously unbanked population of the country into the financial system, through the use of technology.
According to the RBI notice, the primary objective of setting up Payment Banks is to further financial inclusion by providing small savings accounts and remittance services to migrant labour workforce, low-income households, small businesses, and other unorganised sector entities and users Now that the RBI has released the final guidelines, companies can start to apply for licenses to create private banks, with the deadline for applications set for January 16.
These Payment Banks won't have a physical branch - instead, a "business correspondent" (such as a local retailer) can accept cash and add it to a user's digital account, and then accept cashless payments for his goods. These accounts could also - perhaps more importantly - be used for remittances from family members in other parts of the country.
The new Payment Banks cannot lend money or issue credit cards, but they can do a lot of things that the mobile wallets are not permitted to - for one thing, they can issue ATM and debit cards, and set up branches and ATMs. According to Amit Lakhotia, Vice President - Business at Paytm, this move by the RBI will have far-reaching consequences, and he believes that the adoption of new technologies in the country is not going to be a long process either - he feels that we will see changes starting in months, not years. "We have been working in this area for the last four to six years and this is a big move that the RBI has made," he says. "They [the RBI] realised that bringing about financial inclusion will require the use of technology."
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