In a landmark move towards financial inclusion, the Reserve Bank of India (RBI) has given its approval to set up 11 non-lending payments banks. 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.
Banks can also offer internet banking facilities, allow money transfers and sell insurance and mutual funds. They can issue ATM/debit cards, but not credit cards. Companies run by billionaires Mukesh Ambani and Kumar Mangalam Birla as well as telecom companies Bharti Airtel and Vodafone are among the 11 entities that have received the go ahead.
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.
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-principle' 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.
SBI, the country's largest lender, will take as much as 30 per cent in RIL's proposed bank while Bharti Airtel, India's largest telecom operator, plans to give 19.9 per cent 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 per cent 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.
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