Over the past year, the Reserve Bank of India has introduced innovation-friendly regulations, including nationalisation of banks, building of robust branch, network of scheduled commercial banks, co-operatives and regional rural banks etc. The Payments Bank regulations were particularly noteworthy as they finally provide a framework for a variety of organizations with distribution muscle to provide payment and deposit services at scale in India. It's a step to redefine banking in India. The Reserve Bank expects payment banks to target India's migrant labourers, low-income households and small businesses, offering savings accounts and remittance services with a low transaction cost. It hopes payments banks will enable poorer citizens who transact only in cash to take their first step into formal banking. It could be uneconomical for traditional banks to open branches in every village but the mobile phones coverage is a promising low-cost platform for quickly taking basic banking services to every rural citizen. The innovation is also expected to accelerate India's journey into a cashless economy. The existence of entrepreneurs with diverse backgrounds could ultimately be a test for which model works best, beyond conventional banking.
