Mumbai: Companies run by billionaires Mukesh Ambani and Kumar Mangalam Birla as well as telcos Bharti Airtel and Vodafone are among the 11 entities that Wednesday got the Reserve Bank’s nod to set up non-lending payments banks as part of the financial inclusion drive.
Reliance Industries, which had previously announced partnership with State Bank of India, Airtel M Commerce Services Limited, Aditya Birla Nuvo, Vodafone m-pesa, Tech Mahindra and Department of Posts got the ‘in-principal’ approval from RBI to set up such niche banks.
Sun Pharma promoter Dilip Shantilal Shanghvi and Vijay Shekhar Sharma of PayTM also got approval in their individual capacities.
Besides, Cholamandalam Distribution Services, Fino PayTech, and National Securities Depository (NSDL) also got approval, out of the 41 applicants.
Payments bank licence will allow companies to collect deposits (initially up to Rs 1 lakh per individual), offer Internet banking, facilitate money transfers and sell insurance and mutual funds.
Besides, they can issue ATM/debit cards, but not credit cards.
Commenting on the development, Finance Minister Arun Jaitley said such banks will ensure more money comes into the banking system and will help reach out to people in rural areas.
“Various banks are looking at increasing their rural reach which includes big banks like SBI; payments banks will help them realise this,” he added.
SBI, the country’s largest lender, will take as much as 30 percent in RIL’s proposed bank while Bharti Airtel, India’s largest telecom operator, plans to give 19.9 percent stake in the bank to Kotak Mahindra Bank Ltd.
A total of 41 companies had applied for the permit but “some of the entities who did not qualify in this round, could well be successful in future rounds,” RBI said, adding that in future it plans to grant such licences “virtually on tap”.
Aditya Birla Nuvo Limited has tied up with Idea Cellular which will have 49 percent stake in the joint venture.
“The ‘in-principle’ approval granted will be valid for a period of 18 months, during which time the applicants have to comply with the requirements under the guidelines and fulfil the other conditions as may be stipulated by the Reserve Bank,” RBI said.
Communications and IT Minister Ravi Shankar Prasad said the payments bank licence is a proud moment for the postal department and it should prepare itself properly and effectively to become a vehicle of financial inclusion in the country.
The payments bank licence will enable the network of 1,54,000 post offices (including 1,30,000 rural post offices) to offer banking services to the masses in the country.
“We are confident that this move will play a pivotal role in bringing millions of unbanked Indians into the folds of banking,” Airtel said in a statement.
Vodafone India MD and CEO Sunil Sood said the licence will enable the firm to build further on this and “offer a more comprehensive portfolio of banking and financial products and services, accelerating India’s journey into a cashless economy.”
After getting the approval, G V Nageswara Rao, CEO and MD of NSDL said the depository will be going alone “but of course we want to keep our options open.”
“We don’t have any specific timeline to share with you but the real work starts now,” he added.
PayTM founder Vijay Shekhar Sharma said he wants to launch the payments bank at the earliest as this is an opportunity.
“I would first go in areas where customers understand PayTM well,” he added.
Meanwhile, RBI further said that on being satisfied that the 11 applicants have complied with the requisite conditions as part of ‘in-principle’ approval, it would consider granting to them a licence for commencement of banking business.
Until a regular licence is issued, the applicants can not undertake any banking business, the central bank added.
Draft guidelines for licencing of payments banks were released for public comments in July 2014 while the final guidelines were issued in November 2014.
In the Union Budget 2014-2015 presented on July 10, 2014, Finance Minister Arun Jaitley had announced that after making suitable changes to current framework, a structure will be put in place for continuous authorisation of universal banks in the private sector in the current financial year.
“RBI will create a framework for licencing small banks and other differentiated banks. Differentiated banks serving niche interests, local area banks, payment banks etc. Are contemplated to meet credit and remittance needs of small businesses, unorganised sector, low income households, farmers and migrant work force,” he had said.
On the process to select candidates for payments banks, RBI said a detailed scrutiny was undertaken by an External Advisory Committee (EAC) under the chairmanship of Nachiket Mor, Director, Central Board of the Reserve Bank of India.
The recommendations of the EAC were an input to an Internal Screening Committee (ISC), consisting of the Governor and the four Deputy Governors.
RBI also plans to issue licences for ‘small finance banks’ for which it has received 72 applications. These banks will primarily take up basic banking activities in defined geographies and cater to small business units, marginal farmers, and shop-keepers, among others.
Meanwhile, Dilip Shanghvi Family and Associates (DSA) along with Telenor welcomed the ‘in-principle’ approval to set up payments bank.
DSA is the main promoter in the application along with Telenor Group and IDFC, an infrastructure financial institution.