Payments banks may hit PSBs
This refers to your edit “Banking on disruption” (August 21). FE deserves compliments for predicting the “banking disruption” following the advent of payment banks (PBs). I am tempted to put it a little differently. PBs are likely to sound death knell of remittance business of public sector banks (PSBs). We have taken up the case of PSBs first due to their enviable geographical reach compared to their counterparts in private sector. Small time remitters, now depending upon the India Post (via money orders) and PSBs will switch over to PBs given the hassle-free platform provided through technology-human interface. Moreover, inordinate delay experienced by them while transacting such business in PSB branches will be eliminated. Further, they will have flexibility of operation in terms of timing and location. No wonder PSBs could soon find their small deposits vanishing. What is the solution? Perhaps, the country’s biggest lender (read State Bank of India) realised it first and so joined the race by collaborating with Reliance Industries. When one cannot fight out the competition, it is better to join hands seems to be the understanding of SBI. But other PSBs may have to wait till the grant of second batch of licences. Fee business was a risk-free business for banks. All these years remittance business was a shoo-in business due to the absence of alternative remittance platforms, except for money orders. PSBs should have spruced up the quality of customer service, at least in handling the remittance business. They have lost this opportunity. Reserve Bank Governor Raghuram Rajan allayed the fears of bankers by stating that PBs would complement banks. Being the authority empowered to grant licences of PBs, it was a logical statement. But for banks, it is a different ball game. They will soon experience the walkout of small deposits in favour of PBs, not due to interest arbitrage but due to sheer convenience of the platform.
KV Rao, Bengaluru
Learn from Tsipras
This refers to the report “Greece makes debt repayment amid rising snap poll pressure” (August 21). This is what happens when politicians go back on their pre-poll promises. If a snap poll were to be held in Greece now, will people believe former prime minister Alexis Tsipras? In India also, such promises were made before the general elections in 2014, but now the government is finding it difficult to fulfil these. Earlier also,Tsipras won the elections on the promise of anti-austerity measures, but he went back on his promise. The people of Greece were under the impression that he will emerge as a modern Alexander to save the nation from the economic crisis, but he has been a disappointment. How long will the country need to be bailed out by taking new loans to pay off the existing loans? Greece will go to polls amid capital controls, loss of reputation in the global arena, and with a question hanging on it being a Eurozone member. Do Greek politicians have a solution which can be believed by the people, to take the nation out of the economic crisis? It remains to be seen whether Tsipras will outmanoeuvre his rivals? The Greece crisis is a lesson for Indian politicians that tall promises should not be made to the public, one that are difficult to fulfill—there is a limit to selling dreams to the people.
Deendayal M Lulla, Mumbai