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Mobile wallet company Paytm, which is planning to apply for a payment bank licence, believes that initially, economic viability might be a challenge for banks.
“A payment bank will be working on a thin margin. We are expected to go to the hinterland and tap the consumer base there. This is a cost-heavy structure and, therefore, financial viability for a bank will not be easy,” said Amit Lakhotia, vice-president of Paytm.
However, many believe allowing payment banks to distribute third-party products such as mutual funds and insurance and including services such as international remittance will help boost the incomes of such companies.
Paytm is the flagship brand of One97 Communications, a mobile internet company. It is likely its application for a bank licence will be in the name of One97 Communications, which has been operating in India since 2000.
RBI had asked players to ask for any clarification on niche banking licence guidelines by December 15. Entities have asked questions regarding corporate restructuring and branch opening.
“We are looking at applying for a licence. But before that, Pre Paid Instrument issuers (PPIs) have asked the regulator for a few clarifications regarding the structuring definition and FDI (foreign direct investment) and FII (foreign institutional investment) limits. We believe 24 per cent Indian and 74 per cent foreign shareholding is not a simple issue when an existing company is going to apply. So, several players have sought clarification on this,” said
Players have also sought clarification regarding branches. Lakhotia said though 25 per cent of the branches had to be in rural areas, more clarity was required on what constituted a branch.
RBI hasn’t clarified whether the branches of payment banks have to be on the lines of branches of existing banks or on different lines.
RBI had said aggregate foreign investment in a payment bank would be capped at 74 per cent of the bank’s paid-up capital. In its final guidelines, it had also specified for the first five years, promoters would have to hold at least 40 per cent stake.
In its final guidelines on bank licences, RBI had stated entities applying for a licence should have experience of at least five years in running this business, with a track record of 14 years. Lakhotia doesn’t view this requirement as a challenge.
RBI has allowed those interested in applying for a licence to tie up with an existing bank. However, Lakhotia feels with the deadline for submitting applications less than a month away, finding a partner won’t be easy.
The central bank has asked interested parties to apply by January 16. The applications will be screened by an external committee, which will send its recommendations to RBI.
