(Image source from: })
India’s central bank gave “in-principle” approval to 11 applicants seeking to start payments banks as a part of efforts to bring hundreds of millions of people across the nation into the formal financial system.
Few of the winners of the approval include mobile-payments arms belonging to three telecommunications companies, India’s postal service and the CEO of One97 Communications. According to the Reserve Bank of India, payments banks, which were granted approvals, are expected to gain compliance with regulatory guidelines within 18 months after which they can earn licenses.
How will the Payments banks work?
Payments banks will accept deposits of around $1,500 from customers. These banks will be able to as handle remittances for migrant workers, facilitate payments for small businesses and households with low-income.
Mobile-payments companies with payments-bank license will be able to operate more like a bank and less like cash-transfer service Western Union.
Bringing poorer Indians into formal financial system
Prime Minister Narendra Modi’s major campaign brought more people into the formal financial system. Under the campaign, over 170 million people opened bank accounts since August 2014.
The central bank hopes that through these payments banks and “small banks”, another innovative category of financial institution, poorer Indians particularly in rural areas could be reached.
-Sumana
