The last day for applying for a payments bank licence from the Reserve Bank of India (RBI) saw large business houses including Mukesh Ambani-led Reliance Industries Ltd (RIL), Kumar Mangalam Birla-led Aditya Birla Group and Kishore Biyani-led Future Group joining the race.
These companies either went alone or tied up with existing banking players to tap into the market of unbanked customers in rural areas and smaller towns. While the demographics of customers in such regions are typically suited for big consumer-centric industries such as telecom, fast-moving consumer goods (FMCG), retail and oil, the eventual move for such banks toward a cashless system also prompted the need for larger companies with similar resources, to pitch for such licences.
On Monday, RIL, one of India’s largest private companies by sales, tied up with State Bank of India, to apply for the payments bank licence, while retail major Future Group joined hands with infrastructure finance company IDFC for its bid. The two companies join Sunil Bharti Mittal-led Bharti Airtel, which had earlier roped in Kotak Mahindra Bank for a similar licence. Aditya Birla Nuvo, another company with large telecom interests, applied for a licence alone.
“RIL has applied for a payments bank licence. RIL will be the promoter and SBI will be the joint venture partner with equity investment of up to 30%,” RIL said in a statement. “The partnership (with SBI) is in accordance with the guidelines for payments bank issued by RBI and subject to grant of licence by RBI.”
“It brings together the strengths of two of India’s Fortune 500 companies committed to making a transformative impact on India’s financial inclusion landscape,” the statement added.
Sources said Vodafone has also submitted its application.
The exact number of applicants is yet to be made public by RBI.
In November 2014, RBI came out with norms for payments banks that allowed companies in telecom, retail and other sectors to apply for such a licence. The norms stipulated that the minimum capital requirement for a payments bank is Rs 100 crore and these banks can only accept deposits up to Rs 1 lakh crore.
“We today have a situation where about 75% of the country still uses cash and is off the banking system,” said Aman Bhargava, director at Grant Thornton. “Using cash is expensive. The move to allow private players, was mainly guided by three reasons – provide basic banking, move to a cashless system and make transactions profitable not subsidised.”
In a statement to the BSE on Monday, Aditya Birla Nuvo said the company submitted an application to RBI for a licence for payments bank, where Aditya Birla Nuvo will be the promoter and hold 51% equity capital. Idea Cellular, another Aditya Birla Group company, will be holding the remaining 49% equity capital. The Aditya Birla board also approved that equity participation of Idea may be increased up to 60%, if permitted.