As per RBI guidelines in India, the concept of Payment Banks has originated upon thorough study made by a Committee on Financial Services For Small Business and Low Income Households recommendations. The Payment Banks will cover unbanked and underbanked remote areas so as to include the left outs in the ambit of banking. The Payment Banks is another step to further financial inclusion whereas just till recent past, maximum coverage of people who did not have banking facilities or bank accounts are covered & provided banking facilities by way of a special scheme called Jan Dhan Yojana and huge deposit is already mobilized by the already existing participating banks.
The question arises how Payment Banks concept came into fold. There exists already a PPI Model viz. Pre Paid Instrument Providers Model. Under PPI, the people used to load money from their bank accounts through digital wallet and make use of this money by making payment of their utility bills through mobile phone. This PPI model has helped to coin an idea for forming Payment Banks in India.
The payment banks are not permitted to lend except to the Government. Hence credit risk is not persisting in the case of Payment Banks.
On the other hand, there are MFIs (Micro Financing Institutions) whose job is to provide credit to the needy people. These MFIs have their own customer base in rural & far off areas. Managing credit and recovery is the job of workforce deployed by these MFIs.
There are good discussions as regards Partnering of MFIs with Payment Banks are concerned.
The point is why MFIs should partner with Payment Banks whereas the nature of their business respectively is defined well?
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