New Banking Paradigm
Synopsis
Payment Bank is a new initiative from RBI that intends to bring in the ‘unbanked’ population (around 50% of the Indian population) into the mainstream Indian banking. As Payment Banks are touted to serve the purpose of financial inclusion with their distinctive characteristics, this case flyer, based on the accompanying article1, can be used to understand the concept and connotations of Payment Banks.
Case Positioning and Case Setting
This case flyer can be used either at Undergraduate or Post Graduate level to understand the need, importance and unique characteristics of Payment Banks
Preamble to the Case Flyer Analysis
Only 40-50% of Indians have accounts with financial institutions, according to the KPMG estimates. To service the remaining population, RBI has created two new banking categories, called small finance banks and Payment Banks. Payment Banks are meant for simple banking transactions. These banks will not be allowed to lend or accept term deposits. Customers cannot deposit more than ₹1 lakh in their account. As none of the banks are yet operational, it is very difficult to predict who would make the cut with their profitability and Unique Selling Proposition (USP). This case flyer is meant to provide the canvas of the Indian financial system, Indian banking system and discuss about the distinguishing characteristics of Payment Banks. Accordingly, this case flyer was orchestrated as shown in Exhibit (TN)-I.....................
Case Analysis
I. Indian Financial System, Indian Banking Structure and Gap Analysis
The purpose of first section was to introduce the participants/students to Indian financial system, its role in economic development and the need for Payment Banks has to be arrived after doing a reasonable gap analysis.
1. Indian Financial System and its Components
• The financial system refers to the process of flow of savings from individuals or householders who act as suppliers of funds to seekers of funds such as business houses and government [Exhibit (TN)-II].
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• Financial system functions as an intermediary by channelling funds from areas of surplus to area of productive use. It promotes the process of capital formation as well as contributes to the acceleration of Indian economic development.
• Indian financial system Comprises of a set of financial institutions, financial markets, financial instruments and financial services, which facilitate the transfer of funds from savers to investors [Exhibit (TN)-III].
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Exhibits
Exhibit (TN)-I: Suggested Classroom Orchestration
Exhibit (TN)-II: Financial System at a Glance
Exhibit (TN)-III: Components of Indian Financial System
Exhibit (TN)-IV: Indian Banking Structure
Exhibit (TN)-V: Comparison between Payment Banks and Commercial Banks
Exhibit (TN)-VI: List of New Payment Banks
