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With barely four days left for submitting applications for payment bank licences, telecom operators, retailers and prepaid payment instrument issuers are in a rush to partner private sector banks.
Airtel M Commerce Services Ltd (AMSL), a wholly owned subsidiary of the country’s largest telecom service provider Bharti Airtel, said on Thursday that it would apply to the Reserve Bank of India (RBI) for a licence and Kotak Mahindra Bank will acquire 19.90 per cent stake in it. Currently, AMSL offers mobile money services under the brand name Airtel Money.
Gopal Vittal, MD and CEO (India and South Asia), Bharti Airtel, said Kotak’s banking expertise coupled with Airtel’s strength in telecom would help deliver financial services to millions of unbanked citizens across the country.
Others are not far behind. While hectic negotiations are underway between Vodafone and YES Bank, and Future Group and IDFC, Oxigen Services, a prepaid instrument player, has signed a memorandum of understanding with RBL Bank (previously known as Ratnakar Bank). The banks will pick up a minority stake in these companies, which will apply for payment bank licences. Idea Cellular is also planning to apply for a payment bank but may choose to go solo, industry sources said.
Industry experts said according to the Reserve Bank of India’s (RBI) guidelines, a scheduled commercial bank can take up to 30 per cent stake in a payment bank.
“However, if a bank crosses the 20 per cent mark it could be viewed as a co-promoter and then getting a payment bank licence could be difficult. Hence, banks will keep their stake below 20 per cent,” said a person familiar with the development.
It is learnt that IDFC is in talks with Kishore Biyani’s Future Group for 19.8 per cent stake in the latter’s proposed payments bank. “IDFC’s banking arm will pick up the stake in the payment bank if Future Group gets a licence for the same from the RBI,” an executive said, requesting anonymity.
YES Bank has been engaged in discussions with a number of telecom operators but may partner Vodafone, said a source. However, since RBI guidelines mandate that a payment bank should be owned and controlled by residents Vodafone may have to partner another bank for its proposed entry.
“Vodafone has a problem of ownership. It is not considered as an Indian entity. Technically, it cannot own a majority stake in the payment bank. It will probably have to partner other banks apart from YES to gain eligibility,” said a source.
Sources also said that Oxigen has signed a MoU with RBL Bank, which allows it to sell stake to the private lender if it gets a payments bank licence.
Federal Bank has also been talking to a number of players but has not yet identified a partner. “A lot of discussion is still happening. The opportunity is being explored,” said a banker.
Sources said that some of the players are signing MoUs with multiple banks. “These MoUs are not binding in nature till they get a payment bank licence. Once the licence is allotted the company will have the right to choose its partner,” said a source.
The RBI had issued final norms for licensing of niche banks – that is, payment banks and small banks, in November. “Prepaid instruments (PPIs) or other retail players don’t have such a wide reach or customer base and therefore we chose to partner a telecom operator “ said Rajat Gupta, joint managing director of Kotak Mahindra Bank, explaining the rationale behind Kotak Mahindra Bank’s investment in Airtel.
Apart from Airtel, mobile wallet firm Paytm, flagship brand of One97 Communications, has applied for a payment bank licence while SKS Microfinance plans to set up a small finance bank.
In November last year, the RBI had released final guidelines for payment banks, allowing telecom companies, retail chains and corporate houses to apply. Even government-owned entities such as India Post can apply, subject to their owner’s approval.
The minimum capital requirement for setting up of a payment bank is mandated at Rs 100 crore by the RBI. The key focus area for them has to be domestic payments and they are not allowed to lend. However, they can accept deposits of up to Rs 1 lakh and offer current as well as savings account deposits. They can also issue debit cards and internet banking but not credit cards.
Both cash-in and cash-out services are allowed through various channels such as branches, automated teller machines (ATMs) and business correspondents (BCs). Cash-in could be made through mobile banking and cash-out via point-of-sale terminals. Payment banks have been allowed to serve as BCs for other lenders as well.
However, payment banks are barred from taking deposits from non-resident individuals. In-bound remittances into accounts maintained by residents with a payment bank will be treated as deposits. At the time of making an application, the promoters or promoter group will have to furnish a plan and methodology to comply with all the requirements of the guidelines within 18 months from the date of in-principle approval or as on the date of commencement of operations, whichever is earlier, according to RBI guidelines.
NEW AVENUES
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Kotak Mahindra Bank to acquire 19.9% stake in Airtel’s m-commerce services subsidiary, which will apply for payment bank licence
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YES Bank discussing with Vodafone for a minority stake
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Vodafone likely to partner more than one entity to meet eligibility criteria on ownership
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IDFC likely to buy 19.8 per cent stake in Future Group
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RBL Bank, Oxigen sign memorandum of understanding
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Federal Bank, DCB Bank exploring partnership opportunity
- Idea Cellular in discussion with banks but may go solo
(Kotak Mahindra and Associates are significant stakeholders in Business Standard Ltd)
