Some 10-15 years back, if someone had told me that by 2015, mobiles in India would have a subscriber base of around 96 crores (Source: TRAI Press Release, Feb'15) - I would have probably suggested that they were madly optimistic (raving mad would have been the exact reply). But it is a reality today, and a good percentage (10% - as per an Ericsson report in 2013) of that population owns a smartphone.
So can a similar revolution take place in the Banking space? We have Aadhaar, RuPay and a Unified Payments Interface (something that will allow seamless banking transactions through a mobile, similar to mobile wallets like Airtel Money or Paytm) when it comes to the technology support. 11 Payment Banks have recently been given a license by RBI, with Small Bank licenses scheduled for next month. If there can be a Banking revolution, this seems to be the right time for it.
The PM's Jan Dhan Yojana (17.45 crore bank accounts), Social Security schemes (for Life Insurance, Accident Insurance and Pension) as well as the Sukanya Samriddhi Scheme (1.8 lacs accounts as of 31.03.15) for the girl child have resulted in many people opening their first bank accounts. But how far these initiatives go will depend upon how far technology can reach.
PSU banks are not very happy with the Payment Banks move, and rightly so. They have supported the Government in all its banking initiatives so far, even if it meant bearing the burden of bad debts. And they have not been adequately compensated for it. While PSU banks have largely depended upon their widespread capital intensive network of branches and ATMs, Payment Banks will depend upon technology to reach the remotest corners of India.
And technology is an area that PSU banks have not been able to focus upon. That is where lies a huge competitive gap. The arrival of Payment Banks and Small Banks is likely to erode their retail customer base. Especially in the urban areas, which is the more profitable segment.
But if PSUs can collaborate with the Payment banks, by investing in them (like Reliance-SBI) or by using them as Business Correspondents , and grow together, it will usher in a new era of banking for India. Hopefully, the forgotten people at the bottom of the social ladder will finally be included in this financial model.
Related Links:
A very good article on financial inclusion at mrunal.org
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