Impact of payment banks on the current banking scenario in India

Abstract

The banking system in India dates back to 1770 when Bank of Hindustan was setup at Calcutta under European rulers. The first big breakthrough that came through was in July 1969, when 14 commercial banks were nationalized via a Banking Companies (Acquisition and transfer) Ordinance. The next step was to include Indian rural population into the financial system and National Bank for Agricultural and Rural Development (NABARD) was established in 1975 through an ordinance under the leadership of Indira Gandhi. But even 40 year later, 51.4% of all farmer households are financially excluded from all formal/informal sources. 1 To tackle this problem, Reserve Bank of India has allowed 11 entities to set up a different kind of bank called as Payment 78Banks (PB) in an attempt to include the unbanked population in the financial system of India.