Wednesday, June 05, 2013

Online-Only Direct Banks in India, are we ready yet?

Direct banks (online banks) are very popular almost everywhere except in India. Of course you will see online banking aka e/internet banking versions of traditional banks here, but I haven't come across not a single online-only bank. Are we that much traditional not to trust anything which is online?

There are indeed a number of benefits online banks offer over the traditional, biggest among them is low cost of maintenance, with minimal physical presence and absolutely no branches. A big chunk of interest rates that you get from traditional banks are eaten by their advertisements and operational costs across hundreds of their branches. Offline banks also have advantages, like depositing physical cash etc. Of course safety is a major concern but e-banking of traditional banks have been thriving in the subcontinent for the last decade and I haven't came across a single case where net banking got hacked leading to loss of money.

Of the traditional internet banks, my preference is small-sector banks that are often owned by local co-op society which offer high interest for savings/fixed account. Albeit extremely poor service with their internet banking that oftentimes fails in IRCTC payment gateway, Punjab National Bank is offering perhaps the best return for teachers. Their "Shikshak Sweep" scheme available for permanent teachers is the best sweep-in scheme offered by any banks in India.

In summary I would love to see some online-only banks coming up in India that offers a sweep-in sweep-out facility to guarantee highest returns at the same time having the lowest operational costs. Shoot your opinion in the comments.