Tag: jan dhan

The central government has allowed permission to new private banks for conducting government-related business will be given under the RBI guidelines. The government has indicated the RBI to allow other private banks to perform government-related business to ensure there is a level playing field.

The potential

With deposits of at over Rs 11 lakh crore, the government sector, both Central and states combined, business is very lucrative for the private sector banks. It is a source of bulk deposits, which gives them ‘float’ money that can be deployed in the overnight market. It helps get low-cost and stable deposits and customer acquisition with scores of government employees opening accounts.

It generates commission income, which though is falling, forms a substantial chunk.

How can private banks benefit

Private banks are more aggressive in marketing and technology savvy than PSBs. However, they do not have a branch network that rivals PSBs which are spread to the village levels. Private banks will find it tough to give competition to PSBs in the hinterland.

Also, private banks, with their sparse branch networks, will find the small value pension business unviable, which the PSBs with their vast manpower strength can serve. Also, shifting the pension account business would be cumbersome for many

What should the private banks do?

Experts say private banks should focus on garnering new government business, which will help them acquire new customers.

With the growing number of taxpayers and development programmes such as Jan Dhan, the government business remains lucrative for the private banks. However, it may be still some time they catch up with the PSB peers.

What the Finance Minister says

“Now, following the existing norms based on which several banks have been given permission to do the business. So, those rules as per the RBI guidelines be applied on newer banks and new private banks which approach the RBI,” finance minister Nirmala Sitharama said while giving permission to new private banks.

“Some customers are already benefiting from private banks from such services. The attempt now is to bring a level playing eld. Some private banks are already doing, all public sector banks are doing, why not extend to all private sector banks so that everybody gets an equal opportunity,” she explained.

This is being done because the business is growing and many more citizens are approaching the banks. As it was highlighted, the ease of doing business will have to be extended to all customers, she said.