About the Project

The Reserve Bank of India (RBI) had issued operational guidelines for payment banks in November 2014 and provided clarifications on issues raised by interested applicants. Payments banks are considered to be the first set of differentiated banks by RBI that are aimed at providing deposits, payments and remittance services to low income groups and other non- risk sharing simple financial services. However, they are not allowed to undertake lending activities.

In August 2015, it granted in-principle approval to 11 out of 41 applicants to set up payments banks in India. These successful applicants are required to comply with relevant conditions under RBI guidelines and respective in-principle approval within 18 months. This has triggered the need to undertake analysis of RBI guidelines and clarifications in greater detail, amongst relevant stakeholders. A preliminary review of existing literature, RBI guidelines and clarifications reveal existence of several regulatory and competition concerns, which have the potential to impose avoidable burden and restrict the growth of payment banks.

Given the background, CUTS International (CUTS) proposes to undertake an evidence based research project for a period of six months (December 2015-May 2016) to identify key competition and regulatory bottlenecks for growth of payments banks in India. It will be involved in designing policy interventions and engaging with regulatory agencies to reduce avoidable regulatory burden and facilitate growth of payments banks in India.