Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
4. The rise of payments banks and digital financial services has significantly impacted the traditional banking sector in India. In the light of the above, discuss the reforms that are needed in the banking sector for improved risk management and embracing technological innovation. (250 words)
Difficulty level: Tough
Reference: Live Mint , Insights on India
Why the question:
The RBI has ordered the payments bank subsidiary of Paytm to halt the acceptance of fresh deposits in its accounts.
Key Demand of the question:
To write about various banking reforms in the light of rise of payments banks, further reforms that are needed for long term viability of baking sector.
Directive word:
Evaluate – When you are asked to evaluate, you have to pass a sound judgement about the truth of the given statement in the question or the topic based on evidence. You must appraise the worth of the statement in question. There is scope for forming an opinion here.
Structure of the answer:
Introduction:
Begin by giving context.
Body:
First, write about the recent rise of payments bank and digital financial services in the banking sector. Cite statistic in this regard.
Next, write about the successes and shortcomings of the above banks.
Next, suggest reforms that must be taken in order to overcome the above mentioned limitations – strengthening governance, addressing asset quality issues, ensuring adequate capital levels, investing in technology upgrades, and ensuring a robust regulatory framework.
Conclusion:
Conclude with a way forward.
