GS Mains Model Question & Answer :To achieve financial inclusion in the country ,Payment Banks could be seen as a pre-cursor to it. Discuss. Comment

Q. To achieve financial inclusion in the country ,Payment Banks could be seen as a pre-cursor to it. Discuss. Comment

Model Answer:

To achieve financial inclusion in the country ,Payment Banks could be seen as a pre-cursor to it. Discuss.

RBI granted two kinds of licenses 1) universal bank licenses 2) Differentiated bank license

Payments banks come under Differentiated one.

The objective of Payment bank:

1) Financial inclusion by providing small saving account and payment\remittances services to migrant labour workforce , low income hosehold small businesses and other unorganized sector entities.
2) Can work as Business correspondent of another banks.
3) Can also distribute simple financial products like mutual funds units and insurance products.
4) Can take deposit upto 1 lakh per account and can issue debit card but not credit card and also can not lend.

By the following objectives it seems that large section of masses who are untouched by the banking system will be taken care of.

It also help in spreading financial literacy.

Private players like Airtel Indian post Paytm and Fino who were provided by the license have large customer base in rural hinterland which help in banking facilities.

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