Payment and small banks

Payment and small banks

Recently RBI has been focusing on payment and small banks.

The due date for application was extended for both which made many big shots to put on their hands together.

Reliance , Bharthi airtel and some more telecom companies are more serious about this payment banks. Why? What benefits do these companies gained through initiating a payment banks. Non-banking financial companies are concerned into small banks. What benefits do they get through small banks? Let me start with Payment banks. Payment banks are fresh idea initiated by RBI to reduce cash payments which eventually increases card payments. Payment banks are allowed to take deposits worth maximum 1 lakh but are not allowed to provide loans.

They can provide prepaid instruments like debit, credit cards. This idea is to promote cards into regular practice and to reduce cash circulation. Most of telecom and e-commerce companies are into payment banks mainly as their payments can be done through these instruments and reduce cash in future. It is expected by the companies to bring in ease through these cashless payments.  Similarly, small banks are encouraged as a part of financial inclusion.

Small banks can provide loans to poor people. The number of applications received for small banks were unexpected as the regulations put up for small banks were said to be difficult for claiming profits. The regulations mentioned were 75% of loans has to be given for priority sector and 50% loans are said to within 25 lakh. So, it is clearly understood that obtaining good profit needs good volumes. But still non banking financial sector needs to initiate small banks because they feel it is an opportunity to enrich growth.

As e-commerce sector is experiencing a huge growth which is expected to reach $17 billion by 2017 and as internet is playing a unimaginable role in all sectors , payment banks are expected to change the manner business is being done today and small banks are expected to reduce the poverty zone.

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