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130RBI was established in 1934 with the passing of the Reserve Bank of India Act, 1934 and presently maintains the largest regulatory scope and power in the banking sector. 131It should, however, be emphasized that this landscape has changed significantly in the last few years due to the evolution of financial technologies in conjunction with the liberalization of the financial system. Banks have traditionally been the dominant financial intermediary, 122 India Stack – The Bedrock of a Digital India (2016, December 7). Retrieved from http://indiastack.org/india-stack-the-bedrock-of-a-digital-india/.123 Section 5(1)(b) of the Banking Regulation Act 1949.124 Machiraju, H.R. Indian Financial System (2010, October 1).125 Section 5(1)(c) of the Banking Regulation Act 1949.126 Machiraju, H.R. Indian Financial System (2010, October 1).127 Scheduled banks are those that have been included in the Second Schedule of the Reserve Bank of India Act, 1934 and fulfill certain capital and corporation requirements. Banks that are not included in the Second Schedule of the Reserve Bank of India Act are considered non-scheduled banks. See also, Parameswaran, R. Indian Banking (2001).128 Topic-wise Solved Papers for IBPS/ SBI Bank PO/ Clerk Prelim & Mains By Disha Experts.129 Topic-wise Solved Papers for IBPS/ SBI Bank PO/ Clerk Prelim & Mains By Disha Experts.130 Machiraju, H.R. Indian Financial System (2010, October 1).131 Reserve Bank of India: Functions and Working. Retrieved from rdocs/Content/PDFs/FUNCWWE080910.pdf
15WORKING DRAFTbut the landscape has seen the rapid rise of alternative payment and banking services, as well as fintech startups focused on offering financial services. The growth of e-commerce in India has seen the emergence of digital financial services and intermediaries that are rapidly gaining traction among the Indian public. This growth, in conjunction with the red tape associated with “traditional” banks’ has seen their market share for payments and loans e decline as a result. Non-banking finance companies (NBFCs) contribution to the Indian economy has increased from 8.4 percent in 2006 to more than 14 percent in the March of 2015 and their continued growth is projected.132Furthermore, in order to facilitate financial inclusion, RBI “had created a framework for licensing Payments Banks/Small Banks and other differentiated banks”.133The beginning of NBFCs in India can formally be traced back to the 1964, where Chapter III B of the RBI Act, 1934 was “introduced to regulate deposit-accepting NBFCs”.134In 1996 and 1997, the RBI developed a more “enhanced framework”, including “introduction of entry point norms, stricter and more detailed regulations with respect to acceptance of deposits”, “maintenance of a portion of deposits in liquid assets, creation of a reserve fund, etc”.