Unified payments interface, new banks signal revolution in banking: Rajan

Mumbai: Reserve Bank of India (RBI) governor, Raghuram Rajan on Monday said that the banking system is in the midst of a revolution, with the introduction of niche banks, and specialised digital payments systems.

“What we have in India is the most sophisticated public payments infrastructure in the world. (But) It is not just the payments that are part of the revolution, it is a whole new set of banks that are coming in,” Rajan said while speaking at the launch of the unified payments interface (UPI) by the National Payments Corporation of India Ltd (NPCI).

The central bank has already licensed 10 payments banks and 10 small finance banks, of which, some have are already beginning to start operations. Last year, two new (full fledged banks) IDFC Bank and Bandhan Bank started operations.

The new banks, and the initiatives of older private and state-owned banks have led to the revolution, Rajan said.

“There is collaboration in this revolution but there is also immense competition and the winner is the customer. We hope customer experience with developments like today’s, improves tremendously and the ease of making payments, the ease of saving and the ease for buying financial products also improves tremendously.”

Owing to the efforts of the banking and non-banking financial system over the last few years, different parts of a payments system, such as the customer, the merchant, their service providers, the payments operator and banks from all sides, have all become part of one chain, which is commendable, Rajan stated.

“Somewhere along this chain, a transaction may go wrong -- we hope that happens rarely, but it could go wrong,” he warned, adding that the system should now work towards improving the grievance redressal process for customers and protecting the system from security breaches and fraudulent transactions.

Apart from this, the focus should also be on inclusion—towards bringing in those outside the payments universe and those without smartphones, Rajan said.

As a regulator, RBI will continue its stance to be informed and adaptive, without too many limitations, while forming regulations, the central bank chief said.

“As a regulator it is the easiest to say no to a proposal when you do not fully understand the problem. The problem with saying no is that then we will never fully work out the problem at hand and it keeps the system from developing. Too many limitations up front and you prevent growth and development.”

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.