Banking sector should be flashing red; ditto for economy
First, the FM asked [government-owned] banks to only issue RuPay cards as the first option to customers.
Second, she exhorted them to seed all bank accounts with Aadhaar number and, wherever necessary, with PAN (permanent account number) by December this year. “I will not be patient to hear that accounts not linked with Aadhaar or PAN still exist beyond December 31. There should not be any unverified account in the system,” she added. She later admitted that this deadline could get extended to March 2021.
Third, she advised banks to treat their retired employees the way they do in defence. She said, “There everyone is treated as one family, be it the servicemen or retired. I want to have the same culture in the Indian banking system and want them to take care of their retired employees in a better way.”
She also urged bankers to improve professionalism and the amalgamation of banks should be taken as an organic way to create large banks to serve aspiring India: “I want eight State Bank of India [entities] in the country. Every bank should be professional and in the post-COVID-19 world, as the world changes, you should also not remain the same, especially after the amalgamations.”
All the three suggestions are fraught with risk.
First, the finance minister should not tell bankers what to do. Micro-management is not allowing banks to be professional. Pushing RuPay cards is the job of product managers, not bankers. Bankers give customers what they want, and not what the government may want them to have. This confusion about the role of bankers can have profoundly serious consequences.
Moreover, as a recent TheKen report showed, RuPay is already the biggest card network in India, with more than 500 million bank accounts linked to it, and has over 600 million such cards in the market. But RuPay is being threatened not by foreign cards, as much by government owned UPI. The latter has become NPCI’s new favourite, and RuPay is forced to make room for its younger, more powerful sibling.This will also harm RuPay’s prospects, as other avenues for payments may get blocked.This is evident from the chart below.
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