In the next few weeks, RBI will put out guidelines inviting applications for small finance banks. Small Finance Banks are banks that will cater to smaller customers across the country. The detailed guidelines will also be put out announced by RBI Governor.
Referring to payment banks, he said they should tie-up with regular commercial banks to offer different services. “My hope is that by licencing payment banks, we would also further cause of bank payments, bank alliances.”
Highlighting that technology has an important role to play in financial inclusion, he said certain ‘Ps’, including Products, Price and Protection summarise the aspects which need to be pondered over by bankers. Recalling that RBI has made efforts to reach out to customers in remote areas, Rajan said that communications technology and alliances between banks and mobile companies would help in the task.
Stressing the importance of price with regard, he said “affordable excellence” that envisages good, simple and affordable products, is absolutely needed. Citing the example of ‘Pradhan Mantri Jan Dhan Yojana’ in this regard, he said technology helps in monitoring how the individual uses the direct benefit payments.
Referring to bio-metric technology used in the IDRBT to establish the identity of individuals, he said the biometric technology can help in making transactions with bank cards relatively safe. “It (biometric) is a technology we need figure out how to roll it out in rest of India. Because, think of it. The problem today, If I just give a card to an individual, somebody else can take the card,” he said.
Some individuals may find it difficult it to understand that they need to key in the PIN number themselves, he said. “Information and analytics are important for bringing small and medium firms into financial ambit as well and low transaction cost is key to make access to finance more easily available to them,” Rajan said. Regulations also need to be adapted in tune with the changes in technology and RBI has been at the vanguard of technology, he said.
On the negative side of technology, Rajan touched upon the Nigerian frauds to drive home the point that cyber security is also equally important. He cited the example of JP Morgan reportedly losing a large number of accounts due to hacking as a case in point.
“We have to be aware that technology brings both good and bad. We have to guard against the bad side of technology. That means, we need institutions like IDRBT to think of defence,” he added.