RBI gives in-principle nod to 11 applicants including RIL, Aditya Birla Nuvo
MUMBAI: Reliance Industries, India Post, Bharti Airtel, Vodafone and Paytm are among 11 applicants that have got 'in principle' approval for setting up payments banks that will provide barebones facilities aimed at covering the vast swathe of population that has no access to financial services.They will take deposits, convey remittances and dispense payments to recipients, making them ideal for migrant workers who need to send money home, for instance. They will not engage in lending. Apart from India's top phone companies and the post office, others that have got initial Reserve Bank of India approval out of 42 applicants include Sun Pharma founder Dilip Shanghvi, Aditya Birla Nuvo, Fino PayTech, Tech Mahindra, National Securities Depository and Cholamandalam Finance.
Applicants that sought licences have tied up with a range of partners. "The applications were screened for financial soundness, i.e., five-year track record of the promoter and the key entities of the promoter group," RBI said in a statement. "The assessment also included
governance issues with a focus on 'fit and proper' criteria for promoters based on due diligence reports and/or any other information indicating deliberate and repeated violations of law/regulations."
Those that didn't make the cut include Muthoot Finance, Future Retail's Kishore Biyani and Videocon. The central bank chose the applicants based on their assessed ability to reach customers with technology along with the financial strength to roll out services in areas that remain uncovered, RBI said.
The central bank kept the hopes of many applicants alive by promising to move to a process of "on-tap" licensing. This means applicants can seek licences whenever they want to do so. "We will do every justice to this opportunity," said Paytm founder Vijay Shekhar Sharma. "Led by technology and a lean structure at Paytm, we will bring half-a-billion Indians to the mainstream economy by 2020.
We want to be the driver of financial inclusion. It will be a vibrant ecosystem."
EXISTING BANKS MAY SUFFER
Existing banks may lose some business, even though some of the bigger ones have launched wallets and other app-based functions. Companies that provide wallet services such as Oxigen or Itz Cash could also face pressure.
RBI Governor Raghuram Rajan had promised to end the era of unified banking licences, of which very few have been issued, which kept more than half the nation unbanked until Prime Minister Narendra Modi's Jan Dhan Yojana made it possible for nearly every household to have an account. If payments banks succeed, rural India could be sold more financial products such as insurance and mutual funds, channelising savings into productive purposes.
Payments banks can distribute third-party financial products but can't lend or issue credit cards. They will have to invest most of their deposits in government securities and keep the balance with banks. Promoters need to have least Rs 100 crore in capital. "We see this licence as an opportunity to promote financial inclusion by providing banking and transaction services to unbanked, underbanked and small businesses," said SBI Chairman Arundhati Bhattacharya.
LEVERAGING REACH OF MOBILE TECH
"With over 90,000 m-pesa agents, we are already providing people in remote areas a convenient way to transfer money and make payments in a safe and secure manner," said Sunil Sood, managing director and CEO of Vodafone India. "We remain committed to actualise the government's vision of financial inclusion by leveraging the reach of mobile technology to service the unbanked and under serviced sections of the society."
GV Nageswara Rao, MD & CEO of NSDL, said, "The payment landscape is poised for disruption. Over time, we have to move electronic. We have a track record of innovation to make changes in the way the common man is able to transact, make or receive payments. The card payment system has not taken off because there is a cost to the merchant. The advent of smartphones opens up the opportunity for payments banks."
Rishi Gupta, MD & CEO of Fino PayTech, said, "Our existing structure is ready for payments bank challenges. We plan to raise about Rs 350 crore to scale up business at Fino Payments Bank. At present, we have over 30 million customers in our business correspondence business and about 5 million in the remittance business."
Dipak Gupta, joint managing director of Kotak Mahindra Bank, said, "Broadly, telcos have a large customer base and thus we get an opportunity to service a different product.
The challenge is how do you make e-payments a normal part of life compared with cash.""This is a very good combination. It combines our knowledge of financial management, and telecom expertise of Telenor and Shanghvi's business acumen. Shanghvi will be the single largest shareholder," Rajiv Lall, vicechairman & MD-designate, IDFC Bank told ET.
"With over 90,000 m-pesa agents, we are already providing people in remote areas a convenient way to transfer money and make payments in a safe and secure manner," said Sunil Sood, managing director and CEO of Vodafone India. "We remain committed to actualise the government's vision of financial inclusion by leveraging the reach of mobile technology to service the unbanked and under serviced sections of the society."
GV Nageswara Rao, MD & CEO of NSDL, said, "The payment landscape is poised for disruption. Over time, we have to move electronic. We have a track record of innovation to make changes in the way the common man is able to transact, make or receive payments. The card payment system has not taken off because there is a cost to the merchant. The advent of smartphones opens up the opportunity for payments banks."
Rishi Gupta, MD & CEO of Fino PayTech, said, "Our existing structure is ready for payments bank challenges. We plan to raise about Rs 350 crore to scale up business at Fino Payments Bank. At present, we have over 30 million customers in our business correspondence business and about 5 million in the remittance business."
Dipak Gupta, joint managing director of Kotak Mahindra Bank, said, "Broadly, telcos have a large customer base and thus we get an opportunity to service a different product.
The challenge is how do you make e-payments a normal part of life compared with cash.""This is a very good combination. It combines our knowledge of financial management, and telecom expertise of Telenor and Shanghvi's business acumen. Shanghvi will be the single largest shareholder," Rajiv Lall, vicechairman & MD-designate, IDFC Bank told ET.
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