RBI has granted in-principle approval to 11 entities to set up Payment Banks, who will be able to collect deposits (initially up to Rs 1 lakh per individual), provide Internet banking, facilitate money transfers and sell insurance and mutual funds. They can issue ATM/debit cards, but not credit cards.
"This is nothing but a direct attempt to boost private sector banking and minimise the role of public sector banks and also to reduce their market share," C H Venkatchalam, All India Bank Employees Association (AIBEA) General Secretary, told PTI.
The entities which have been allowed to set up payment banks include Reliance Industries, Aditya Birla Nuvo, Vodafone, Airtel, Department of Posts, Sun Pharma's Dilip Shanghvi, Tech Mahindra, National Securities Depository and Cholamandalam Distribution Services.
A total of 41 entities had applied for payment banks licence.
It may be noted that SBI chief Arundhati Bhattacharya had also raised concerned over such banks, saying they are going to eat into the market share of government lenders.
RBI Governor Raghuram Rajan tried to allay the fear of competition from payment banks and said these will serve as feeder into the universal 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," Rajan had said.
Venkatchalam said giving licence to private companies to set up payment banks will adversely affect the public sector banks.
"If these banks are allowed to collect deposits, which are of low cost in nature, public sector banks will be deprived of the same and their cost of banking will increase," he added.
Source : Economic Times