November 2016

The Reserve Bank of India issued Operating Guidelines For Payments Banks and Operating Guidelines For Small Finance Banks on October 6, 2016. Some of the key guidelines that will ease operational challenges for Payments Banks include: the Payments Bank can engage entities including the companies owned by their business partners and own group companies on an arm’s length basis as Business Correspondents; arrangements can be made with any other Scheduled Commercial Bank/Small Finance Bank for amounts in excess of the prescribed limit of ₹ 100,000 to be swept into an account opened for the customer at that bank
Payments Banks need not issue passbooks for the deposit accounts; Payments Banks may decide not to take the wet signature while opening accounts etc. The RBI also clarified that if the KYC done by a telecom company, which is a promoter/promoter group entity of the Payments Bank, is of the same quality as prescribed for a banking company, Payments Bank may obtain the KYC details of the customer from that telecom company, subject to customer consent.

The ICFI October Policy Brief, “Making Financial Inclusion Work for the Poor” brought out the need for more detailed data and a customer centric approach for financial inclusion.The three takeaways from the brief are as follows:

1. A regular national survey is essential to track granular data on usage and unmet financial needs of the population by geography and income segment.
2. The business case for financial inclusion will come through for financial services providers when they adopt a customer centric approach to products and processes. Banks must now address the psychological distance that the poor face in their banking experience.
3. Strong customer protection and grievance redressal mechanisms are imperatives to build trust in formal financial services.

In a recent paper, Digital Payments as a Platform for Improving State Capacity (Centre for Global Development, October 2016), Daniel Radcliffe gives an overview of how digital payment systems can help expand the capabilities of governments, enhance the efficiency of public programs, and improve the lives of the poor. The paper argues that the biggest impacts of payment connectivity on state capacity will stem not from the digitization of existing government payments, but from new policy levers that become available when a government-citizen payment connection is in place.The paper describes four such levers:

1. Eliminating fuel subsidies while helping the poor.
2. Taxing dirty fuels, reimbursing citizens, and encouraging green energy use.
3. Improving nutrition while reducing administrative costs of food delivery.
4. Boosting government transparency and accountability.

Section I: Policy – the latest from India’s policymakers

Evolution of Payment Systems in India: Or is it a Revolution?
Shri R. Gandhi, Deputy Governor, Reserve Bank of India, October 22, 2016

Notifications:

Section II: News and Views Digest – the latest from India and abroad

India

USAID, Finance Ministry bring Catalyst for digital payments in India
India telcos keen on digital payments despite slow ROI
Rural customers: Safe bet for digital payment companies
For more and more Indians, 'cashless' is king
Indian payments start-ups look to displace cash
How the Indian state is building a new generation of digital public goods
From next year, MGNREGS workers to get wages via Post Payments Bank
FinoPaytech banking big on tech disruptions
'Payments bank is a long-term play'
How many payments banks will come up finally?
FinoPaytech eyes payment bank launch by Q4 of FY17
Starting trouble for payments banks
Lowdown: RBI's operational guidelines for payments banks
Financial inclusion a work in progress in India: Arun Jaitley
Are we ready for a world without OTP?
More Women Are Financially Included in India Than Ever Before

International

Kenya Ends Hidden Costs for Digital Financial Services
Advancing Financial Inclusion Through P2G Payment Digitization
Time to Take Data Privacy Concerns Seriously in Digital Lending
How BOMA Is Using Technology to Reach the Extreme Poor
Wave Money Myanmar: The Power of Smartphone Design
Emerging Opportunities for Digital Finance in Indonesia
Why We Need to Start Talking about Operational Inefficiencies
The Power of Smartphone Interfaces for Mobile Money
How Financial Inclusion Can Boost a Nation’s Health & Well-Being

Section III: Research – surveys and studies on expanding access to financial services

Section IV: The latest from Indicus Centre for Financial Inclusion

Indicus Centre for Financial Inclusion, 2nd Floor, Nehru House, 4, Bahadur Shah ZafarMarg, New Delhi 110002