Money & Banking

Payments banks: RBI Governor, SBI chief not on the same page

Our Bureau Mumbai | Updated on January 23, 2018

RBI Governor Raghuram Rajan. Photo: Ramesh Sharma

Arundhati Bhattacharya, Chairperson, State Bank of India.

Rajan sees a connect, Bhattacharya espies a threat

Reserve Bank of India Governor Raghuram Rajan and State Bank of India Chairman Arundhati Bhattacharya on Thursday took opposing stands on the impact of payments banks on the traditional lenders.

On Wednesday, the RBI gave in-principle approval to 11 entities, including large conglomerates in the energy, telecom and finance sectors, including Reliance Industries, Vodafone, Airtel and Aditya Birla Nuvo, to start payments banks.

While Rajan sought to allay fears of competition from payments banks, Bhattacharya said they were worrisome.

“Why this payments bank is a little worrisome is because they will be allowed to have savings deposits. What if they go for poaching rates, then many of the commercial banks could lose a portion of the deposits which are relatively lower priced so that will take away the ability to transmit rates and give further loans at lower rates,” Bhattacharya said in a conversation with the RBI Governor at the SBI Banking & Economic Conclave.

Rajan, on the other hand, saw no threat to the banking system and said the payments banks will serve as a “feeder” for the existing banks. “I don’t think these 11 new banks are a threat to the existing banks. These new banks will complement the existing system by traversing the last mile. The reason for this is that there is nothing the universal banks cannot do that the payments banks can do. But there are some of the things that the payments banks can’t do which the universal banks can,” he said.

“The bank branch can become a centre of activity, helping with cash handling or do some completely new work…There is a lot of scope for everyone… not everybody will succeed but this is a revolution which can happen,” he added.

Meanwhile, a report from Fitch Ratings said the focus of payments banks on smaller deposit holders and mobile banking will add to competitive pressures for public banks, and could potentially pose risks to their market share over the long term.

Rajan said that he doesn’t see payments banks transforming into universal banks. Small finance banks, which are still to be licensed, may have an easier path to transition into universal banks, he said.

The RBI Governor added that payments banks will also help increase the utility of new bank accounts opened under the Prime Minister’s Jan Dhan Yojana.

Published on August 20, 2015

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

null
This article is closed for comments.
Please Email the Editor

You May Also Like