A number of big business houses in India are looking forward to spreading their wings and branch out in the payment banking sector. After Bharti Airtel became the first one to announce its plans to do on Thursday, Aditya Birla Nuvo Ltd, Vakrangee Ltd, Future Group and Reliance Industries Ltd (RIL) also followed suit. All the companies mentioned later said on Monday that they had sought the RBI permission to set up payment banks.
The RIL submitted a joint application to the RBI in partnership with the largest lender of India, the State Bank of India, to set up a payment bank which is authorized to offer services like remittances and deposits but not loans.
A payments bank licence will allow companies to accept deposits of up to Rs.1 lakh and increase payment options, especially for people who have no bank accounts. Today was the last date for inviting applications.
SBI being a commercial bank could not apply for a payment bank licence, explaining why they chose to join hands with the Mukesh Ambani led RIL with a 30 percent stake while the latter holds the lion’s share with 70 percent.
“The partnership is in accordance with the guidelines for Payments Bank issued by RBI… This partnership brings together the combined strengths of two of India’s Fortune 500 corporations committed to making a transformative impact on India’s financial inclusion landscape,” the statement said.
RIL’s proposed foray into the banking sector will come at a time when they look to position themselves as the leading broadband service providers in the country. Their service network which will first be launched in a few cities and towns will eventually go on to cover more than 90% of urban population of the country and nearly 35% of the villages. They already have 2,300 retail stores across 166 cities and affect the lives of more than a million customers daily.
The SBI are no minnows either. With 15,869 branches and 43,515 ATMs, they are formidable in their own right too.
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,” the statement said.
Sources say the proposed payment bank will be an independent board managed company with an arm’s length relationship with both RIL and SBI.
Aditya Birla Nuvo had submitted a joint application with Idea Cellular Ltd, both the proposed partners being a part of the $40 billion Aditya Birla Group.
The Future Group led by Kishore Biyani had also filed an application for a payment bank permit, proposing to name the new entity as NuFuture Payment Bank.
The other notable applicant today was the Mumbai-based computer software developer Vakrangee Software Ltd which refused to share any details with the media.
Bharti Airtel Ltd, the largest mobile phone operator in the country, had been among the first to apply on January 29 in partnership with Kotak Mahindra Bank Ltd.
The RBI has specified that only telecom companies, supermarkets and companies that run electronic wallets, or other prepaid instruments, can open such banks in the country. The minimum paid-up equity capital for these banks will be Rs.100 crore, while the promoter contribution has been set at a minimum of 40% at the start.
