Payment Banks-A Step towards Financial Inclusion

Abstract

For the past several years, there have been a series of policy responses to the changing landscape of Financial Inclusion and Payments globally. The proliferation of non-bank participants in facilitating payment services, such as business correspondents, third-party service providers (who have created distribution networks to service diverse end user needs) and Mobile Network Operators has generated different approaches to delivering financial services access to hitherto un served and under-served populations. In particular, there have been a host of different innovations in Mobile Money in sub-Saharan Africa, in South East Asia as well as in the South Asian neighbourhood. In India, the Reserve Bank of India (RBI) has espoused a “Bank-led” approach to payments and inclusive financial services. The Business Correspondent (BC) model introduced in 2006 has thus far been the chief instrument of outreach. It is estimated that currently there are over 200,000 BC agents2across India. In addition, Prepaid Payment Issuers (PPI) licenses were issued to cater to a host of different transaction use cases The guidelines on Payment Banks issued by the RBI is a policy step towards creating differentiated banking structures to respond to the difficulties faced by certain underserved segments of the population in accessing formal financial services as well as to promote a “less-cash” economy through digital payments. It is also a response to address longstanding concerns of BCs as well as PPIs. Owing to the high cost of cash transactions, the RBI has been advocating a movement towards a “less-cash” economy through institutions that can facilitate the adoption of digital money that can manifest itself through smart cards, mobile phones or other technologies that offer a secure access to a stored value account. The present study is based on the role of the payment banks in the financial inclusion and RBI’s Ist draft for the payment banks.
Keywords:- Payment Banks ; Financial Inclusion.