Alternate revenue models for Payments Banks in India

Significant progress has been made in expanding access to formal
banking in India through a host of reforms by the Government of
India. Through the Pradhan Mantri Jan Dhan Yojana (PMJDY),
there has been a significant increase in access to banking across
households. Subsequent schemes for insurance and pensions have
attempted to extend access to a wider gamut of financial products
– the Pradhan Mantri Suraksha Bima Yojana (accidental death and
disability insurance), the Pradhan Mantri Jeevan Jyoti Bima Yojana
(life Insurance) and the Atal Pension Yojna (pension).
organized financial services. Payments Banks are permitted to
offer basic bank accounts (current and savings with a balance limit
of INR 100,000) but are not permitted to extend credit or accept
term deposits. They can accept demand deposits, pay bills, facilitate
remittances and government welfare payments to their customers,
and provide other basic banking services to individuals and small
businesses .
While these schemes have focused on financial access, increasing
financial usage still remains a challenge for both individuals and
micro and small businesses. Most small business owners continue
to rely on unorganized sources for financing their daily working
capital at extremely high rates of interest. Lack of access to
formal financial services not only acts as a growth inhibitor, but
also creates a poverty spiral for the impacted segments of the
population.
Conceptualization of Payments Banks is a bold policy reform
well suited to both broadening access to and creating usage of
Over 220 million
PMJDY Accounts 6
Over 1 billion
Aadhaar IDs 7
Over 180 million
RuPay cards 8
MSMEs contribute nearly 8% of
GDP, 45% of the manufacturing
output and 40% of exports and
yet largely rely upon high cost
unorganized credit market due to
limited access to the organized
financial markets. 9
Alternate revenue models for Payments Banks in India 4