BL :Mumbai, Jan. 7:2014
The committee on financial inclusion has come up with two broad designs for the banking system in the country — the Horizontally Differentiated Banking System (HDBS) and the Vertically Differentiated Banking System (VDBS).
The framework is based on the functional building blocks of payments, deposits and credit.
In HDBS design while all configurations are deposit-taking, the variations between them are on account of: (i) the ways in which they originate risks and transmit them throughout the system; and (ii) their size and focus — whether regional or sectoral.
Six categories
The HDBS has six design categories — national bank with branches; national bank with agents; regional bank; national — consumer bank; national-wholesale bank; and national- infrastructure bank.
The rational for VDBS is usually linked to niche capabilities such as credit under-writing for specialised business segments or network management in the case of payments.
The HDBS has five design categories — payments network operator; payments bank; full-service bank; wholesale consumer bank; and wholesale investment bank.
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