Big companies like Reliance, Airtel, Vodafone and Aditya Birla Nuvo are eyeing payment banks just when Modi Jan Dhan scheme claims to have brought everyone into the formal banking fold
A clutch of hopefuls, ranging from the biggest to smaller make up the list of 113 applications, 72 for starting small finance banks and 41 for payment banks. The biggies for starting a payment bank include Reliance Industries Ltd (RIL), Aditya Birla Nuvo Ltd (ABNL), Bharti Airtel and Vodafone. In a statement, Reserve Bank of India (RBI), said the External Advisory Committees (EACs) for small finance banks and payment banks will be chaired by Usha Thorat, its former Deputy Governor and Dr Nachiket Mor, Director, Central Board of the Reserve Bank.
Among the others to have applied for payment bank, include Oxigen Services India Pvt Ltd, Paytm, Citrus Payments, Cholamandalam Investment and Finance Co, Videocon Industries, Future Group and Vakrangee Ltd. In addition, there are some little known names also in the ring, including Kolkata-based Village Financial Services and Chennai-based GI Technology as well as Manish Khera, managing director and chief finance officer of mobile money service provider YTS, who has applied for a small finance bank in his individual capacity. SKS Microfinance, DHFL, IIFL Holdings Ltd (formerly India Infoline), and UAE Exchange are among those who want to set up small banks.
A payment bank can accept a maximum deposit of Rs1 lakh from an individual customer, but cannot lend. A small bank can do everything that a normal bank can do but at least 50% of its loan portfolio should constitute loans and advances of less than Rs25 lakh. Interestingly, public sector banks have opened about 12.4 crore accounts as on 30 January 2015, under the Pradhan Mantri Jan Dhan Yojana (PMJDY), thus bringing the unbanked population into banking system. These customers can not only use banking, but also are receiving free RuPay debit card and insurance coverage, in addition to Rs5,000 overdraft facility, six month after successful use of banking facility.
Will payment banks ride on the new needs of this vast population who have just brought into the banking fold by helping them with payments and funds transfer? After all, payment banks would enable payments and remittances to migrant labours, low-income households and small businesses, who find regular banking cumbersome.
According to TM Bhasin, chairman of Indian Banks’ Association (IBA) and chairman and managing director, Indian Bank, currently around Rs10,300 crore are lying in around 12.4 crore accounts opened under the PMJDY, that too when about 73% of accounts have zero balance. He said, around Rs52,000 crore would be distributed during the next fiscal year through these accounts, and activation of these accounts will happen once the subsidies starts flowing that would make the system automatically viable.
The deadline for submission of applications for niche banks – payment banks and small finance banks ended on Monday after being extended by the RBI.
While most of the smaller players have applied on their own, several biggies had preferred the partnership route. For example, while RIL had collaborated with State Bank of India (SBI), ABNL, has preferred to tie up with its sister concern Ideal Cellular from the Aditya Birla group.
RIL will be the promoter of the payment bank joint venture, with SBI, the country's largest lender holding up to 30%. "The Payment Bank will leverage SBI's nationwide distribution network and risk management capabilities along with the substantial investments made by RIL in its retail and telecom businesses. It will deploy state-of-the-art technology, build scalable infrastructure and create extensive branch and business correspondent network in order to provide last-mile access and intuitive user experience to all sections of society," RIL, said in a release.
In a statement, Vodafone said, "Vodafone has filed an application with RBI for the payments bank licence. We are exploring options for partnerships. We are keen and remain highly committed to building a financially inclusive business model leveraging our telco strengths and experience in the mobile payments space, fully aligned with the government and RBI's vision."
ABNL said it will hold 51% stake in the payment bank to be named as Idea Payments Bank Ltd, in the joint venture with Idea holding the rest.
It must be noted that the Aditya Birla group company earlier last year failed to get a license for a bank from RBI.