When will the RBI allow payments banks to grow up?

AU Small Finance Bank received in-principle approval in August from the Reserve Bank of India (RBI) to become a universal bank. It was the first institution of its kind to reach this milestone. This also marked the first time in a decade for the RBI to issue a full-fledged banking licence.This has a couple major consequences. For AU, the transition means it will be able to offer a much broader range of services to its customers—and significantly expand its business. For the RBI, it was a development that demonstrated how small finance banks, which were introduced in 2014, are now mature enough to do much more.Meanwhile, another innovation that the RBI introduced that same year, payments banks, aren’t doing nearly as well. Some have shut down, and those that are still around often have negative bottom lines.Both small finance banks and payments banks were meant to give underserved and underbanked Indians options to be part of the formal banking system. But the outcomes more than a decade after their emergence are vastly different. The Ken contributor Sarthak Gupta explores the issue in this edition of Make India Competitive Again, as read by Snigdha Sharma.*Read this edition as a newsletter: https://the-ken.com/newsletter/make-india-competitive-again/when-will-the-rbi-allow-payments-banks-to-grow-up/Subscribe to the Make India Competitive Again newsletter: https://the-ken.com/newsletters/make-india-competitive-again/