India's incentives for digital payment to benefit banks

Reduction in cost to income ratio over time is expected.

The Indian government stated that people making digital payments up to INR2000 will not have to pay service charges. It also announced incentive for digital payment for railway bookings and purchase of retail fuel and even announced a free insurance in some cases.

It will install two point of sale machines in all villages with population of less than 10,000.

Maybank KimEng comments that this is good for the banking sector as it will reduce their cost to income ratio over time.

The private banks with superior technology infrastructure will be the bigger beneficiary. Another set of beneficiary, it said, will be the small payment banks and banking correspondents.