In his column "A payment bank won't pay" (Irrational Choice, December 1) Debashis Basu concluded that the newly invented payment banks are non-viable. One of the reasons is that the existing large profitable banks are offering payment services in a big way. First, most of the existing large banks from the state-owned stable have neglected payment services and view them as an inevitable nuisance. As for the other banks from the private and public sector pack, people needing small remittance facilities have avoided them because of the high costs and glamorous interiors. The writer has commented on the inability of payment banks to engage in lending activities. This, however, is a blessing in disguise. Fee-based banking is a zero-risk activity as compared to interest-income-led banking. Public sector banking in India has suffered due to its hyper-active approach to lending.
Having identified all the issues with payment banks, the writer has pinned his hopes on India Post - that has the potential to be a good payment bank. But India Post is again another arm of the government, with associated evils of state ownership. People are still hanging on to such institutions due to the absence of a convenient channel to avail of payment services. A payment bank that uses technology effectively and avoids the pitfalls of a state-owned institution could be a game-changer.
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