RBI allows India Post, 10 other entities to set up payments banks

The Reserve Bank of India (RBI) has granted ''in-principle'' approval to government owned postal services India Post and 10 other entities, including major corporates, mobile carriers and private individuals, to set up payments banks.

Energy-to-telecoms conglomerate Reliance Industries Ltd, telecom majors Bharti Airtel and Vodafone PLC, a joint venture of Aditya Birla Nuvo Ltd and Idea Cellular Ltd are also among successful applicants, the Reserve Bank of India said in a release today.

The entities that will be granted initial permission to run payments bank include:

  • Aditya Birla Nuvo Limited,
  • Airtel M Commerce Services Limited,
  • Cholamandalam Distribution Services Limited,
  • Department of Posts,
  • Fino PayTech Limited,
  • National Securities Depository Limited,
  • Reliance Industries Limited,
  • Dilip Shantilal Shanghvi,
  • Vijay Shekhar Sharma,
  • Tech Mahindra Limited and
  • Vodafone m-pesa Limited.

These selected entities will be given "in-principle" approval for 18 months, after which they will be given licences if they fulfill all conditions stipulated by the RBI.

The payments banks, to be run under the guidelines issued by the RBI on 27 November 2014, are expected to grant millions of citizens access to formal banking.

Reserve Bank of India received applications from a total of 41 companies for the permit, the central bank said in a release, adding, "some of the entities who did not qualify in this round, could well be successful in future rounds."

The selection has been made after a detailed scrutiny by an external advisory committee (EAC) headed by Nachiket Mor, director, Central Board of the Reserve Bank of India.

The final selection was made by an Internal Screening Committee (ISC), consisting of the governor and the four deputy governors, on the basis of the recommendations of the EAC.

This Internal Screening Committee prepared a final list of recommendations for the Committee of the Central Board (CCB), after independently scrutinising all the applications.

While arriving at the final list, the CCB, however, noted that it would be difficult at this stage to forecast the most successful likely model in the emerging business of payments.

The CCB further noted that payments banks will be able to take deposits and remittances, but cannot undertake lending, and therefore the payments bank would not be subject to the same risks as a full service bank, RBI noted.

Nevertheless, the in-principle approvals are subject to the conditions in the guidelines, including any developments in on-going cases.

Going forward, the Reserve Bank intends to use the learning from this licensing round to appropriately revise the guidelines and move to giving licences more regularly, that is, virtually ''on tap''.

The Reserve Bank believes that some of the entities who did not qualify in this round, could well be successful in future rounds.