Game Theory for Indian Banking: RBI Rajan's Game Plan

RBI Governor Rajan seems to be allowing tech companies to enter the payment bank space to see how the market develops.

Economic Times reports that anyone wondering what the 11 payments banks and 10 small banks will do, need not go far. All one has to do is read what the chairman of the biggest lender, State Bank of India, and the Reserve Bank of India governor had to say on them. 

"Do you think the Indian banking system has matured enough to take on the onslaught from payment banks? Does the RBI see this as a first step towards some of the payments banks evolving into universal banks?" is what SBI chairman Arundhati Bhattacharya asked the RBI governor the day after payments banks licences were given out. 

On what is in store, governor Rajan had this to say, "The (RBI) board took the view that it was hard to forecast what would happen in the payment space." He added, "Given the fact that we did not know what could succeed, the board chose to license a variety of players — some tech companies, finance companies, some bank-mobile combines. Now, let's see how the game develops." 

While Bhattacharya's question reflects the potential threat from these nimbler financial companies, Governor Rajan's view shows that many of them may not survive — as with the first round of bank licences in the 1990s where many players failed and were merged with their bigger counterparts. 

SJP @DigitalAsian


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