On Wednesday, the RBI gave in-principle approval to 11 entities, including large conglomerates in the energy, telecom and finance sectors, including Reliance Industries, Vodafone, Airtel and Aditya Birla Nuvo, to start payments banks.
The RBI has received 72 and 41 applications for small finance bank licenses and payment bank licenses respectively.
In a conversation between Rajan and State Bank of India ( SBI ) chairperson Arundhati Bhattacharya, the former said payment banking is one of the most exciting space in the system which will reduce the cost of accessing banks.
The payments bank would be allowed to provide payments and remittance services, but can not issue credit cards or accept deposits beyond Rs1 lakh. They can however issue debit cards, do internet banking and facilitate money transfers.
As the name suggests, payment banks collect small deposits from its customers and make payments, on their behalf, to other parties.
“Universal banks have to provide full service”.
“On all these, since the last monetary policy (on August 4), there has been more information of course, and we will take that into account accordingly”, Rajan said here at the SBI Banking and Economics Conclave. Small finance banks, which are still to be licensed, may have an easier path to transition into universal banks, he said.
“The bank branch can become a centre of activity, helping with cash handling or do some completely new work…There is a lot of scope for everyone… not everybody will succeed but this is a revolution which can happen”, he added.
“A lot of corporations are moving away to borrow their working capital needs”, he said adding that these are mostly big corporations which are highly-rated and not the small ones.
According to him, payment banks and small finance banks would help in expanding financial inclusion. They have an 18-month window in which they can submit their plans and get the final license.
On the economy he said “We do believe there is a pick up…if monsoon improves – sowing has been good – rural demand will pick up”, said Dr. Rajan.
“If the Chinese depreciation holds to about this level, it’s not something that one should be overly concerned about”. Rajan also expressed concerns over debt recovery process and said it requires a systemic change.
Besides, small companies were facing liquidity problem due to non-payment of bills, including those by the government.