Outgoing Reserve Bank of India deputy governor K C Chakrabarty has questioned the viability of payment banks and has said that they do not serve the purpose of financial inclusion. The statement comes at a time when RBI governor Raghuram Rajan has indicated that the central bank was in favour of issuing bank licences for limited purposes such as payments..................
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This is one disadvantage of having stubborn 'specialists' at the top of any institution. The Indian financial system has space for several types of institutions to serve different types of needs. This recognition was there, till, perhaps, the beginning of imported reforms circa 1991. The multi-agency system comprising cooperatives, banks in cooperative, private and public sectors and even the traditional money lender besides chit funds and other players which co-existed then were serving divergent needs of urban and rural clientele at that point of time. With reforms the role expectations changed and the focus shifted to strengthening and supporting private sector banks. Private sector banks were interested in the ‘creamy layer’ of the business and that explains their share remaining low in the total banking business. Right approach would be to re-invent the multi-agency system allowing institutions of various categories to grow and function, maintaining the overall health of the financial system. Post Offices and ‘payment banks’ should be allowed to play their role with appropriate regulatory and financial support where necessary. Each unit of any system should not be expected to be independently viable.
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