The Financial Sector Legislative Reforms Commission (FSLRC) could recommend that the Reserve Bank of India should grant limited purpose bank licences to telecom firms and other industries in order to promote financial inclusion. A working group led by Morgan Stanley India chairman PJ Nayak, tasked by the Commission to propose changes to the country’s payment laws, has proposed a radical new approach to ensure the unbanked get access to formal and secure payment systems, which includes restricting the central bank’s regulatory grip over payment and settlement systems.
Its prescriptions are significant as they offer an alternative last mile solution that could help UPA-2 operationalise its ambitious direct benefits transfer programme to ensure subsidy payouts reach intended beneficiaries through the use of technological innovations.
At the same time, it is getting flak from sectoral experts for not paying enough attention to accompanying risks. Says MS Sriram, a member of IIM-Bangalore’s Centre for Public Policy, “The report doesn’t balance risk and innovation. What is at stake here is small depositors’ savings. The RBI has to be conservative on these issues.”
The complete story by my colleague vikas and yours truly, here.