Village Voice News

In the era of UPI, are payments banks still relevant?

<p>In order to close the gap between conventional banking services and the unbanked people, especially in rural regions, payments banks were established as a category of banks by the RBI in 2015.</p>
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<p>The idea behind these banks was to use technology to provide basic banking services with an emphasis on digital transactions and financial inclusion.</p>
<p>Over the last ten years, the tale of these banks has been uneventful, with the biggest of them all, Paytm Payments Bank, often encountering difficulties with regulatory compliance on a number of fronts, such as risk management and KYC concerns.</p>
<p>However, after the RBI placed the most recent set of new limitations on Paytm Payments Bank, which will take effect on February 29 of this year, the outlook and feelings around digital banking and payments banks have been unfavorable.</p>
<p>This incident should act as a wake-up call for India’s fintech industry, even if Reserve Bank of India Governor Shaktikanta Das has already said that there is no systemic problem resulting from the Paytm Payments Bank disaster.</p>
<p>It has brought attention to how important governance, risk management, and regulatory compliance are for digital banking organizations.</p>
<p>This has significant implications for both the larger banking industry and the fintech environment in India.</p>
<p>Concerns over the reliability and integrity of digital banking systems have been highlighted by the occurrence. One of the main concerns of investors and stakeholders is how this will impact financing for fintechs in the near future. In the age of UPI, are payments banks still viable? Naturally, the RBI’s first concern as a regulator has been safeguarding bank clients, and it has previously ruled out reconsidering its actions in relation to Paytm Payments Bank.</p>
<p>Policy scholar and business advisor Srinath Sridharan gives listeners an idea of what he believes will be the country’s Payments Banks in the future. He believes that, in the present, with UPI reaching ever-higher levels, the idea of payments banks is no longer sustainable. Additionally, according to Sridharan, the moment may be right for the RBI to assess and make the required adjustments to the licensing structure for different types of banks.</p>
<p>To learn more, tune up to this blpodcast.</p>