 "Large banks may not be game stake in payment banks")
Large commercial banks might not be so enthused to come on board to form a joint venture with those raring to form payment banks. For, the picture is hazy about the benefits from such an association. There is also a cannibalisation risk.
An advisor with Indian Banks’ Association said large banks themselves have an extensive branch network to cover under-banked regions. Plus, they would also run the risk of a payment bank in which it picks up stake eating into the original business over a period.
An executive with a large public sector bank (PSB) said the coverage of under-banked regions had improved substantially through the Prime Minister’s Jan Dhan Yojana, launched in August.
A senior State Bank of India executive said they were yet to internally discuss the implications.
Naveen Surya, managing director of Itzcash, a payment service entity, said they were exploring if they'd like to partner with a bank or not. “For the businesses keen on applying it makes sense to partner with a bank, as it will help the player in Casa (current and savings accounts) addition if you partner with a lender. There are certain other areas such as foreign exchange remittance and treasury where banks can lend expertise.”
Entities interested in applying said mid-sized and smaller banks were more keen to partner for a payment bank. Some mid-sized banks might see a benefit to source deposits from uncovered regions by sourcing these through payment banks, a PSB executive said.
Deepak Haria, senior director, Deloitte India, said: “Players that move with a joint venture will have an advantage as those keen to apply might not have a banking background. Having a lender as a partner can help them in easing out some of the operational issues that a payment bank might have initially. For the banks, it means a wider reach.”
However, some believe a six-week window is a little tight for applications and in looking for a partner. The applications have to reach RBI by January 16, 2015.
An advisor with Indian Banks’ Association said large banks themselves have an extensive branch network to cover under-banked regions. Plus, they would also run the risk of a payment bank in which it picks up stake eating into the original business over a period.
An executive with a large public sector bank (PSB) said the coverage of under-banked regions had improved substantially through the Prime Minister’s Jan Dhan Yojana, launched in August.
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The Reserve Bank of India (RBI)’s new rules allow companies to set up payment banks and form joint ventures with a commercial bank, meaning a bank could pick up stake in such a venture.
A senior State Bank of India executive said they were yet to internally discuss the implications.
Naveen Surya, managing director of Itzcash, a payment service entity, said they were exploring if they'd like to partner with a bank or not. “For the businesses keen on applying it makes sense to partner with a bank, as it will help the player in Casa (current and savings accounts) addition if you partner with a lender. There are certain other areas such as foreign exchange remittance and treasury where banks can lend expertise.”
Entities interested in applying said mid-sized and smaller banks were more keen to partner for a payment bank. Some mid-sized banks might see a benefit to source deposits from uncovered regions by sourcing these through payment banks, a PSB executive said.
Deepak Haria, senior director, Deloitte India, said: “Players that move with a joint venture will have an advantage as those keen to apply might not have a banking background. Having a lender as a partner can help them in easing out some of the operational issues that a payment bank might have initially. For the banks, it means a wider reach.”
However, some believe a six-week window is a little tight for applications and in looking for a partner. The applications have to reach RBI by January 16, 2015.