The Reserve Bank of India (RBI) has chosen just 11 out of 41 applicants
to set up payments banks in the country. Payments banks are institutions that
will offer most of the banking services except loans and credit card products
to retail customers. Customers can deposit money up to Rs 1 lakh in these
banks, transfer money, make payments and buy financial products such as
insurance and mutual funds.
The 11 names include India’s postal department, two telecom players
(Airtel and Vodafone), three large corporate houses (Reliance Industries Ltd
(RIL), Aditya Birla Nuvo and Tech Mahindra), two financial services firms (Fino
Paytech and Cholamandalam), two individual entrepreneurs (Dilip Sahnghvi and
Vijay Sharma) and National Securities Depository Ltd, a surprise winner.
The names that are absent in the list are equally notable. These include
Kishore Biyani of Big Bazaar, George Muthoot of Muthoot Financial Services,
prepaid payment instrument issuers (PPIs) such as Oxigen and Itz cash and few
other mobile payment services such as My mobile payments, Pay Point and One
MobiKwik Systems.
The exclusion of several PPIs from the list is a bit surprising since
these entities were originally projected as the deserving candidates to become
payments banks from the very beginning - when the idea of payments banks was
conceived by an RBI panel headed by Nachiket Mor in early 2014. PPIs are firms
that provide cards, which customers can use to make payments with the money
that’s stored in them. There are around 24 PPIs in India. “This will be a
gradual conversion for them,” Mor had said then.
The reason why the RBI chose not to admit majority of these firms in the
list could be the regulator’s apprehensions on their past record, financial
strength and apprehensions on the security of transactions once these entities
are allowed to become banks and begin collecting deposits from public.
Similarly, the exclusion of large hypermarket chain like Big Bazaar indicates
that the RBI isn’t yet comfortable with permitting retail chains to do banking.
Having said this, one must note that the central bank has indicated its
willingness to issue more licences in the future, when the licensing process
will be made based on a continuous (on tap) basis. Companies that failed to get
into the current list can apply again then. As the RBI has indicated, it has
currently chosen firms from different segments and would want to learn from the
experience of their operations.
Most of the companies selected to set up payments banks will hit the
ground running since they already have systems in place.
For instance, both Airtel and Vodafone have fund transfer services.
Airtel already partly undertakes the functions of a payments bank by offering
fund transfer services under Airtel money that has over 1.7 million users. Vodafone
too has a similar offering. RIL has a tie-up with State Bank of India (SBI) for
the payments bank roll-out. The partnership between India’s largest commercial
bank and largest corporate entity comes with huge promises and will be keenly
watched.
But as Firstpost has mentioned before, the
biggest revolution in the offing is the entry of India Post to the banking
sector.
The postal department, which failed to get into the list of full service
banks when the RBI gave permits to IDFC and Bandhan in April 2014, has been
trying for long to get into the banking business. The department has begun to
set up ATMs and connect its offices through core banking solution network. The
post expects to connect about 25,000 branches under CBS in next one year.
The India Post has already been active in the deposit-taking activity
through its various savings schemes.
As of 31 March 2014 the outstanding balances under the post office
savings scheme stood at Rs 6.05 lakh crore, which is nearly equivalent to half
the deposits of government-owned State Bank of India, the country's largest
commercial bank, and double that of the largest private lender, ICICI Bank Ltd.
The department has a network of about 1,55,000 branches across the country, of
which about 1,39,040 are in rural areas.
Going by a 2011 estimate of the postal department, about 6,000 people
are covered on average by post-offices in rural areas and about 24,000 in urban
areas. It also already offers insurance products. Backed by its existing
outlets across the country and a gigantic depositor base already in various
post bank schemes, Post Bank can offer a stiff competition to State Bank of
India and other public sector banks in the deposit market.
Given the fact that India Post is present in many far-flung areas of the
country, where even nationalised banks do not have branches, a Post Bank can
change the way people save in these parts. Post is a trusted brand name in
India’s households and hence, would find it relatively easy to convince
customers keep their savings with the new entity.
The only area, where the Post needs to improve is technology. But a lot
of work has already gone into this part as well. A senior department official
told this writer that the India Post will have to formally approach the
government for its permission to set up payments banks.
Since payments banks do not require huge amount of capital (the initial
capital requirement set by the RBI for these banks is Rs 100 crore as against
Rs 500 crore for full-service banks), India Post will not have to struggle much
to seek the capital assistance from the finance ministry, which, in the past,
had opposed India Post’s plan to become a full-service banks citing higher
capital requirement and lack of experience in offering credit. But, this time,
capital shouldn’t be an issue.
Once the whole network of post offices is connected with adequate
technology, the biggest bank of India for the poor is ready.
Source : http://www.firstpost.com/
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