Axis Bank looking at more partnerships with Big Tech: Axis Bank MD

Amitabh Chaudhry says the private lender spends Rs 900 crore every buying priority sector lending certificates to meet its targets

Several sectors which banks are mandated to participate in do not turn out to be profitable, Axis Bank’s managing director and chief executive officer Amitabh Chaudhry said, adding that the private lender spends Rs 900 crore every year buying priority sector lending certificates to meet its targets. The comments from Axis Bank chief comes days after financial services secretary highlighted lucklustre response from private banks in financial inclusion.

According to Reserve Bank of India norms, 40 per cent of banks’ adjusted net credit must be extended to the priority sector, which includes agriculture and micro, small and medium enterprises.

“They do ask banks to do a lot of the things which don't make money for us, so they fully understand that they need to allow us to do something where we make money to fund a lot of areas where we don’t make money,” Chaudhry said at the Global Fintech Fest.

“We have a 40 per cent PSL requirement, which has 15 subsections. A lot of those areas don’t make money. In the case of Axis Bank, we spent RS 900 crore just buying PSL certificates every year just to meet our PSK lending requirements. It’s not a small sum of money,” he said.

Given such a regulatory environment, he said the way forward would lie in partnerships with Big Tech. He said the bank had already sewed up such partnerships with Flipkart and Google and would have one more stitched up shortly.

Speaking at the Indian Banks’ Accociation annual general meeting last Friday, Sanjay Malhorta, secretary, financial services said that private sector banks' contribute only 3 per cent to accounts opened under PM Jan Dhan Yojana, 4 per cent to Pradhan Mantri Jeevan Jyoti Bima Yojana and PM Suraksha Bima Yojana, and 7 per cent each to Atal Pension Yojana and Kisan Credit Card.

The Axis Bank chief also said banks ‘cannot make money in payments’ because the government has taken out “the entire profit and loss opportunity” from the payments business.

“You have to use payments as a platform to make money somewhere else. The worry is that more and more of these will emerge, which will take away revenue and profitability pools and you have to then find the property from somewhere else. Have the property pool start shrinking, then my worry is that only the big can survive. Small will struggle,” he said.

Recently the Reserve Bank of India (RBI) came out with a discussion paper on charges in payment systems, wherein it asked if transactions can be charged. It also sought feedback from stakeholders on the possibility of imposing a “tiered” charge on payments made through the UPI, based on different amount bands. The finance ministry however immediately denied the possibility of levying charges on transactions done through UPI. Currently all UPI transactions are free but banks and payment firms incur cost on each transaction.

Responding to a question on whether banks will be interested in the cryptocurrencies sector, Chaudhry said, the regulator has made its disapproval of the cryptocurrencies sector very clear by flagging risk of financial instability.

“The banks are very cautious in terms of touching that (cryptocurrencies) sector because the message from the regulator is “beware” and be aware that we do not like it. The regulator’s view is very firm that we do not like this,” Chaudhry said.