State Bank of India (SBI), the country’s largest lender, is strengthening its low-cost business correspondent (BC) model to reach out to rural unbanked areas to compete with the upcoming payments banks.
Payments banks may operate at a much lower cost than that of full-fledged or universal banks while providing access to banking services in the remote parts of the country, SBI chairman Arundhati Bhattacharya said on Friday.
“Their schemes might evolve due to access (to rural unbanked segment). Payments bank might have a cheaper cost structure,” Bhattacharya said during the Ficci Banking Conclave.
She said payments banks would be ahead of the regular banks when it came to their reach in rural households.
SBI already has about 56,000 business correspondents, operating through point-of-sales machines, across the country. The bank will also soon open customer service points in 500 unbanked gram panchayats in West Bengal.
“We are also coming up with the lower cost model. Therefore, we feel that technically there is a lot of competition. And whenever there is competition, the advantage goes to customers,” said Bhattacharya.
The Reserve Bank of India (RBI) has granted in-principle nod to 11 payments bank applicants, including four large business houses, a couple of telcos and the Department of Posts.
The SBI chairman said payments banks would handle small remittances and reach out to rural customers, but these financial institutions would be of limited help to regular customers. “Payment banks would not be interested in credit history as they cannot offer loans to customers. It makes more sense to use full-fledged banks to build the credit history of a person,” she said. Bhattacharya said it was important for the banking industry and customers to develop a credit history