New Delhi: Low cost Internet based transactions and business efficiency due to technology advancements are expected to kill physical banks in next 5-6 years, NITI Aayog CEO Amitabh Kant said on Thursday.
"My view is in next 5-6 years you will see death of physical banks. It will be very difficult for physical banks to survive because the cost of physical banks will be so enormous. It will be so enormous compared to an online instrument, many of the fintech start-up and their ability to do data analysis (and) providing lending," Kant said at an IAMAI event.
He said that with proliferation of mobile phones and Internet based transaction, it will be easy for financial technology firm to do analysis and provide loans to person who requires it and has good credit history.
"Amazing thing is that a lot of this going to happen because India will become data rich before it becomes rich. Our ability to use technology, analyse data and able to reach and provide financial inclusion to people in rural area will be key drivers of growth," Kant said.
He said that India is now home to about 900 financial technology players and received funding of USD 3 billion. This is forcing Indian banks to transform themselves riding on wave of Fintech.
"There is lot happening in India because of Internet. We have leap frogged US technology industry with very simple and practical innovation. Cost of customer acquisition in India fell down to USD 1 where across America and Europe the cost of acquiring is between USD 28-30," Kant said.
He said that in last 45 years about 28 bank licences have been issued by the government, but within last 18 months about 21 payments bank licences have been issued.
In 2015, the RBI had granted 'in-principle' approval to 11 entities, including the Department of Posts, to set up payments banks and proposed to give such licences 'on tap' basis in future.
However, Cholamandalam Investment and Finance Company, Tech Mahindra and a consortium of Sun Pharmaceutical Industries promoter Dilip Shanghvi, IDFC Bank and Telenor
Financial Services gave up their plans to roll out payments bank.
Out of the remaining eight companies in the fray, Airtel, India Post Payments Bank and Chinese firm Alibaba backed Paytm have launched their commercial operations.
Other players are Aditya Birla Nuvo, Fino PayTech, National Securities Depository, Reliance Industries and Vodafone m-pesa. Kant said Indian government is making things easy and simple for businesses.
He, however, was annoyed when director of a company complained about processes at government offices and problem in online transactions in India.
The NITI Aayog CEO said he agrees with the point raised but in last three years lot of things have started changing. "I have been in government for long time to realise that in the last 3 years a lot of attempt has been made to make India very easy and simple," Kant said.
He cited new reforms like goods and services tax, bankruptcy laws, enabling company to register in a day etc.
"You and me have to change India. All of us have to be part of that change. But, people when they live abroad, come to India for 10 days and start criticising everything about India, that's not done," Kant said.