RBI Bets on Payments Banks for Innovation
New entites can push existing banking system to be innovative, says Guv
Mumbai: The Reserve Bank of India is taking a bet on payments banks so that these new entities can push the existing banking system to be innovative, governor Raghuram Rajan said on Monday. The central bank is open to new technology and would wait for regulations to evolve rather than dismiss new systems, Rajan said. “We attempt to be an informed and adaptive regulator…The easiest thing to say is ‘no’. When there’s uncertainty, it is easy to say no. But saying no prevents the system from developing. What should be the preferred thing to say is that wait, we should watch it and see how better the regulation can evolve,” Rajan said while launching a new payment system called the Unified Payments Interface (UPI), which will allow people to send and receive money across banks just through a single identification without sharing financial information.
Rajan listed the launch of payment banks, interest rate futures and a new liquidity framework for banks as examples of how the central bank has pushed for innovation. “We are taking a bet on payment banks. PayTm is an innovative firm and innovative firms are not always comfortable with the regulators. But we want to see where they push the system and so they have a payments bank licence. We are looking at these telecom companies and the- se startups and figure out as we go. Then we would know what more structure that we have to put on the system,” Rajan said.
He also cited the example of a revival in the interest rate futures market after implementing some suggestions from the market. “For a number of years, we have been saying a banking revolution is needed. The revolution is upon us today,” he said.
(From left) Axis Bank MD Shikha Sharma, UIDAI ex-chairman Nandan Nilekani, RBI governor Raghuram Rajan and ICICI MD Chanda Kochhar at the launch of Unified Payments Interface (UPI) in Mumbai on Monday