September 2015

India’s financial inclusion mission has received another big boost. After the success of the PMJDY last year in increasing accounts at the household level, creating significant awareness amongst the poor and unbanked for banking and introducing insurance and pension schemes for the poor, new banks are now in the sector to provide services to low income customers. Last month the RBI granted in-principle approvals to 11 non-banks as Payments Banks, and approvals for Small Finance Banks are expected to come through soon. This month our editorial picks on this new move are - Game Changers, by Daniel Radcliffe, BMGF; The payments banks revolution by Sumita Kale, ICFI, and Did India’s Central Bank get Payments Bank Approvals Right? by Kabir Kumar and Anand Raman, CGAP

Apart from the forthcoming differentiated banks, a new full-service bank, Bandhan Bank started operations last month, the first MFI to become a bank in India. The second new full-service bank, IDFC is slated to begin work next month. As existing banks are partnering or looking to partner with the new differentiated banks, there are significant opportunities ahead for meeting the financial needs of the poor and the hitherto excluded.

Even as the banking sector sees new vigour, the government’s Direct Benefits Transfer programme received a setback with the Supreme Court issuing a four-point interim order- the issue of “right to privacy” has been referred to a larger Constitutional Bench, the use of Aadhaar has been restricted to two schemes of PDS (Public Distribution System) and LPG subsidy only and the government must publicize the point that it is not mandatory to have the card. A Financial Express Editorial: Confusing Aadhaar signals made the succinct point that a voluntary Aadhaar defeats the purpose of a unique identifier, and suggested a time frame be set by the Supreme Court to ensure universal coverage and seeding. S V Divvaakar of Indicus Centre for Financial Inclusion has examined the Supreme Court judgement in detail in his piece, Which comes first: identity or privacy?

Indicus Centre for Financial Inclusion, 2nd Floor, Nehru House, 4, Bahadur Shah ZafarMarg, New Delhi 110002
Contact:sumita@indicus.net Website: www.indicus.net/icfi