PAYMENTS BANKS. ‘Will pose challenges’ to commercial banks

The new payments banks are likely to impact commercial banks, say bankers. 

They echoed the fears expressed by Arundhati Bhattacharya, SBI Chairman, who felt that these new banks will pose a threat to the existing players with their ability to move money as well as compete for low-cost savings accounts.

BusinessLine spoke to some commercial bankers to get their views.

Terming it as a tricky game, N Kamakodi, CEO of City Union Bank, said that on the one side there are telecom companies that can virtually move currencies. On the other, some banks still have limitations in adopting technology.

“While every customer of the bank has a mobile phone, not every individual has a bank account as yet. The last mile connect is still missing, but the mobile phone penetration is phenomenal,” he said.

SR Bansal, Chairman and Managing Director of Corporation Bank, said that the competition for savings bank portfolio, especially in the case of smaller-value accounts, will increase as far as public sector banks are concerned.

Allaying the apprehension of immediate shift in clientele, he said commercial banks are already offering remittances services, such as ECS, card payments, utility bill payments, Net banking, and mobile banking.

P Jayarama Bhat, Managing Director of Karnataka Bank, said that customers choose SB accounts for their convenience. It all depends on the quality of the customer service. Payments banks can accept a maximum of ₹1 lakh per customer, totally concentrating on small account-holders. 

Asked if banks need to carve out a separate vertical to meet the requirements under the payments banking model, Bansal said commercial bankers must prepare themselves to take on the challenge and be more innovative so that they not only match the products and services that are on offer from the new players but also meet the growing requirements of customers.

Bhat said that banks can continue offering good products and apps to customers under their existing structures.

On payments banks being allowed to set up ATMs, he said before offering ATMs they will have to issue debit cards. It will be helpful to commercial banks, as the customers may use it in the ATMs of commercial banks, too. 

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