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Rajan rules out worries over payments bank dropouts

business Updated: Jun 08, 2016 11:36 IST

MUMBAI: The Reserve Bank is “not overly perturbed” with some of the companies opting out of setting up payments banks after receiving the licence, governor Raghuram Rajan said on Tuesday.

“If some entities think that they cannot compete, I think it’s good for the consumer. It’s reasonable if upfront they decide they have no ability to compete,” Rajan told HT during an interaction. “You over-emphasis the three dropouts. Look at their structure and ask whether they were the most obvious to build on some existing network. I wouldn’t be too pessimistic about three dropping out. In fact I would emphasis the value of the process. It can be a fairly profitable business if you do it right.”.

Three firms dropped the plan after the RBI in August gave in-principle approval to 11 companies to set up the banks, aimed at giving access to banking services to those at the lower end of the income scale and in remote areas.

Tech Mahindra announced its decision on May 25 a week after Sun Pharma promoter Dilip Shanghvi, who had joined hands with IDFC Bank and Telenor venture, abandoned the plan.

In March, Cholamandalam Finance, too, had backed out.

“We gave out licences to anybody we thought had the appropriate qualifications to run a payments bank… After doing further analysis and seeing who are the other players that are coming in, some of them have decided to back out... We are not overly perturbed after analysis that they would not go forward,” Rajan said during the second bi-monthly monetary policy announcement for 2016-17.

Applicants should devote more time and do due diligence before seeking a licence, he added.

A payments bank can collect deposits but cannot lend. It can issue ATM and debit cards but not credit cards.

First Published: Jun 08, 2016 11:36 IST