Banking on cusp of change amid competition & innovation

mobilebankingWith entry of new banks and technological advancement, the competition in the Indian banking sector has also intensified.

The competition compels banks to innovate in order to remain relevant and in the race with their counterparts.

Payment Banks: New twist to the traditional banking story

The advent of payment banks has given an altogether new twist to the traditional banking story.


The objectives of setting up of payments banks will be to further financial inclusion by providing (i) small savings accounts and (ii) payments/remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users.

Eligible Promoters:

  • Existing non-bank Pre-paid Payment Instrument (PPI) issuers; and other entities such as individuals/professionals; Non-Banking Finance Companies (NBFCs), corporate Business Correspondents(BCs), mobile telephone companies, super-market chains, companies, real sector cooperatives; that are owned and controlled by residents; and public sector entities may apply to set up payments banks.
  • A promoter/promoter group can have a joint venture with an existing scheduled commercial bank to set up a payments bank. However, scheduled commercial bank can take equity stake in a payments bank to the extent permitted under Section 19 (2) of the Banking Regulation Act, 1949.
  • Promoter/promoter groups should be ‘fit and proper’ with a sound track record of professional experience or running their businesses for at least a period of five years in order to be eligible to promote payments banks.

In a bid to widen the reach of banking services and push the government’s goal of financial inclusion, the Reserve Bank of India has awarded payment bank licences to Airtel M Commerce Services, Reliance Industries, Cholamandalam Distribution Services, Aditya Birla Nuvo, Department of Posts (DoP), Fino PayTech, National Securities Depository, Dilip Shantilal Shanghvi, Vijay Shekhar Sharma, Tech Mahindra and Vodafone M-Pesa.

Once operational, these new category of banks would provide basic banking services like savings, deposits, payments and remittances even without access to the formal banking system.

Entry of New Banks

With focus on focus on retail and micro enterprises in unbanked or under-banked rural areas, Kolkata-based Bandhan Bank Ltd commenced its nationwide operations from August 23.

IDFC Bank Ltd had also been launched in Mumbai this month.

Moreover, about four foreign banks, including DBS of Singapore, have approached the Reserve Bank of India (RBI) for local incorporation.


Now, banking sector is moving on the path of innovation-driven growth. Many banks have begun to take an innovative approach towards banking to create more value for customers, and consequently, the banks.

For instance, IndusInd Bank recently announced the launch of ‘Onthego’ social banking, offering customers a host of banking services through social platforms like Twitter and Facebook.

Banks are striving hard to provide online payments facility to their customers.


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