The New Opportunity in Banking
I came across one News in ET about the new concept in banking which is there in UK and now spreading all over. It is nothing but Peer to Peer Banking. It fascinated me. Under this model the whole process takes through internet. The customers of the bank get the interest rate of their wish. They can also get the loan of their preferred interest rate.
In this model system the customers don’t deposit money with the bank. They actually lend the money to others. So they charge the interest rate of their wish. The borrowers can go for their preferred interest rate of the loan. So the bank which actually does the work of an intermediary is just a platform under this new structure. The depositors (lenders) will have to pay an annual charge of 0.5 % to the bank and the borrowers have to pay a 0.5% interest to the bank on the loan amount. This initiative has been started by the ZOPA Bank. This is a good initiative. One can say that the buyer and seller are transacting directly and the bank is acting as a medium for the transaction.
Can this work in India?
First of all we have very stringent regulations in india as far as the banking sector is concerned. The RBI’s rule like SLR will hamper such a bank to operate in India. But if we forget about the regulator can we tell that this system will work in India?
There are many issues in that:
We in India consider bank as the safest investment tool. Our stock market doesn’t see much investment from the retail investors.
The system of lending which the ZOPA bank has initiated is present in India but not in an organized form. In every part of India this is present. In India the so called HNIs in Village and small towns lend money to the villagers at hefty rates. Many times these villagers fail to pay the interest rate forget about the capital.
The penetration of internet is not much in India. It is restricted to urban area. The rural population can never think of such a banking channel and the advantage of this channel. In India though the internet banking has started for a quite some time it is not that much used because of the low internet penetration.
If we think of the present level of India banking the credit card penetration is not that significant. So banks will never want to loose this instrument and try for a new instrument. They are getting much profit from the credit card business. This market is in expansion phase. They may think of this P-2-P banking when it will be in decline stage.
We still define bank as “A safe place to keep money”. We are not looking it as an avenue for investment. Once the customers think of bank as investment avenue the scenario may change.
In this model system the customers don’t deposit money with the bank. They actually lend the money to others. So they charge the interest rate of their wish. The borrowers can go for their preferred interest rate of the loan. So the bank which actually does the work of an intermediary is just a platform under this new structure. The depositors (lenders) will have to pay an annual charge of 0.5 % to the bank and the borrowers have to pay a 0.5% interest to the bank on the loan amount. This initiative has been started by the ZOPA Bank. This is a good initiative. One can say that the buyer and seller are transacting directly and the bank is acting as a medium for the transaction.
Can this work in India?
First of all we have very stringent regulations in india as far as the banking sector is concerned. The RBI’s rule like SLR will hamper such a bank to operate in India. But if we forget about the regulator can we tell that this system will work in India?
There are many issues in that:
We in India consider bank as the safest investment tool. Our stock market doesn’t see much investment from the retail investors.
The system of lending which the ZOPA bank has initiated is present in India but not in an organized form. In every part of India this is present. In India the so called HNIs in Village and small towns lend money to the villagers at hefty rates. Many times these villagers fail to pay the interest rate forget about the capital.
The penetration of internet is not much in India. It is restricted to urban area. The rural population can never think of such a banking channel and the advantage of this channel. In India though the internet banking has started for a quite some time it is not that much used because of the low internet penetration.
If we think of the present level of India banking the credit card penetration is not that significant. So banks will never want to loose this instrument and try for a new instrument. They are getting much profit from the credit card business. This market is in expansion phase. They may think of this P-2-P banking when it will be in decline stage.
We still define bank as “A safe place to keep money”. We are not looking it as an avenue for investment. Once the customers think of bank as investment avenue the scenario may change.
posted by Mohammad Imran at 2:49 AM
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