RBI is set to bring in revolutionary changes in banking with it's final guidelines for issuing licences for payment banks and small finance banks. The present oligopolistic banking structure has benefited private sectors banks, with no show of competition offered by public sector banks. Technological innovations in banking , implemented through online banking, net banking, ATM banking, Social Network banking etc has already wowed customers but this actually is a blindfold that prevents the customers from focusing on the mediocre customer service and assistance provided by the Banks and the high charges levied.
RBI's new policies would indeed throw a spanner in the works for private banks since it would threaten this market power play that they had been enjoying so far with small finance banks entering the scene. RBI is observed to have become more liberal in issuing licenses to genuine Non-Banking Finance Companies (NBFCs) and Micro Finance Institutions (MFIs), as well as mobile companies and so on (E.g : Airtel Money, Paytm, Digital Wallets). Small finance banks would have to lend 75 percent of their loan portfolio to priority sectors such as agriculture and small businesses and a huge percent of the loans should not exceed Rs 25 lakh.
RBI guidelines state that mobile companies, retail chains, NBFCs, public and private sector companies, etc. can set up payment banks. They just need Rs 100 crore of capital and can offer savings or fixed deposits up to a maximum of Rs 1 lakh. These guidelines for payment and small finance banks will open up the banking sector to the economy's real potential, make banking more customer friendly, encourage financial inclusion, as well as bring down margins.
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