Letters: Check viability

With reference to the report, "Postal department gets moving after payments bank approval," (August 21), has anybody thought about the viability of payments banks? Basic needs of the poor such as deposits, remittances, insurance, payments and pension have been considered under financial inclusion. Since the last decade these needs have been underlined and enough efforts made by the Centre and the banking sector to increase the access of the poor to the financial system. In his Budget speech, Finance Minister Arun Jaitley talked about a proposal to utilise the vast postal network to make the payments bank venture successful.

The entire structure of payments banks is dependent on information technology (IT), which can cut the cost of transactions for the poor. There has to be heavy investment in IT infrastructure to start payments banks. There are other constraints such as market competition, maximum deposit per customer (Rs 1 lakh) and the fact that incentivisation cost of such deposits is more for payments banks and that they cannot lend money.

With paralysed resources to start with, restrictions on income, volume of payment and remittance transactions may not be enough to make payments banks viable. What has been 'other income' for regular banks will be the surviving factor for payments banks. Charles Darwin's principle, 'survival of the fittest', will apply automatically.

Avinash Thite Pune

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