NEW BANKING PARADIGM

ABSTRACT
This case flyer and the base article (New Banking Paradigm by Shinjini Kumar in The Economic
Times, dated: August 26th 2015) are meant to introduce the participants/students to the concept,
the need and important distinguishing characteristics of payment banks. Based on
recommendations of Nachiket Mor (Mor) Committee (December 2013) and keeping in line
with global trends, the Reserve Bank of India (RBI) granted in-principle approval to 11
Payment Banks on February 19th 2015. Six out of these 11 licensees feature amongst Indias
largest business houses (Reliance, Airtel, Aditya Birla Nuvo, Tech Mahindra, Sun Pharmaceuticals
and Cholamandalam Investment). Payment Banks differ from conventional banks as they are
not allowed to lend to customers or issue credit cards. However, they can accept deposits of up
to `1 lakh, offer CASA deposits, issue debit cards and offer internet banking. These banks were
given 18 months to comply with all the conditions laid out by the RBI. How do these Payment
Banks work? How would they benefit customers? How would these Payment Banks aid the
Indian Financial System? How would be these banks profitability affected because of the latent
competition from universal banks?

Pedagogical Objectives

To have an overview of the Indian financial system and Indian banking structure to
understand and fill the gaps in financing small businesses and low-income households

To understand the concept, need and important distinguishing characteristics of Payment

Banks

To examine how Payment Banks can contribute to the financial inclusion and aid in bringing
in the unbanked to the mainstream economy

Case Positioning and Setting

This case flyer can be used for both Undergraduate and Post Graduate level to understand the
need and unique characteristics of Payment Banks

www.etcases.com