RBI grants approval to 11 applicants to set up payments bank

That’s also why the cash limit in the accounts is set to just Rs.

“Payments bank will ensure more money comes into banking system”.

In a statement, he said Vodafone India had partnered several government bodies to run pilots for enabling direct transfer of wages/subsidies.

Sunil Sood, the CEO of Vodafone India, said the approval received Wednesday by the company’s M-Pesa payments unit would allow it to “offer a more comprehensive portfolio of banking and financial products and services, accelerating India’s journey into a cashless economy”. Hopefully, the new payments banks will deliver on those promises, where India’s conventional banks have largely failed.

Communications and IT Minister Ravi Shankar Prasad said the payments bank licence is a proud moment for the postal department and it should prepare itself properly and effectively to become a vehicle of financial inclusion in the country. But with the first set of licences unleashed, cloistered Indian banks will at least have new competition to contend with, on deposit taking (payments banks can accept deposits of up to ₹1 lakh), costs and customer services. Thus, one can pay bills, make deposits of upto a maximum of Rs 1 lakh and enjoy interests on them, issue cheques and drafts through these banks. The partnership between India’s largest commercial bank and largest corporate entity comes with huge promises and will be keenly watched.

Bharti Airtel today said the payments bank licence will help in bringing millions of unbanked Indians into the folds of banking services. They can issue debit cards but not credit cards.

Currently, the Alibaba-funded company has over 100 million wallet users, which is double of Visa and Maestro penetration together. Further, India is now addicted to cash and it will take some time to nudge people towards payments banks. As these players take different routes to roll out their digital platforms, the central bank will have the opportunity to study which set of applicants is best-placed on execution and delivery.

Airtel’s wholly owned subsidiary Airtel M Commerce Services Limited (AMSL) has been granted the approval for payments bank by the RBI.

So why these 11 companies? The goal is to provide small savings accounts, and payments and remittance services to a migrant labour workforce, low income households, small businesses, and others. The business models will no doubt vary – some will look for float, others for fees and some for both – but the idea will be to grab a share of the growing electronic spends, whether from tycoons or truck drivers.

The other entities which have been given “in-principle” approval are Department of Posts, Cholamandalam Distribution Services, Tech Mahindra, National Securities Depository Limited (NSDL), Fino PayTech, and Sun Pharma’s Dilip Shantilal Shanghvi. It can only receive deposits and provide remittances to individuals or use for paying bills. “They will earn revenue from the mobile wallet service and also charge a fee for money transfer”.