Biyani may apply for payment bank

Move comes after Reserve Bank said it would allow NBFCs, mobile phone firms and supermarket chains to operate payment banks

Kishore Biyani’s Future Group will apply to the Reserve Bank of India to operate a ‘payment bank’, an entity the latter has said it is prepared to allow.

It would apply, now that supermarket chains have been permitted to float such banks, said an executive within the group. A payment bank is essentially an entity which can accept deposits and facilitate remittances and payments but cannot lend money.

“We are applying,” the executive said. “We can easily do money transfers and take deposits. We had this mechanism when we used to run the NBFC (non-banking finance company).” The executive didn't want to be identified.

Future had earlier owned an NBFC by the name of Future Capital (now called Capital First); it was later sold to Warbug Pincus. Future Capital had a plan to set up financial supermarkets, to sell credit cards, insurance and other financial products.

When asked, Kishore Biyani, the group’s chief executive, said: “It (a payment bank) is an interesting proposal. We already have a large customer base and it will be an additional service for our customers.”

On Thursday, RBI said it would allow NBFCs, mobile phone companies and supermarket chains, among others, to operate payment banks, subject to certain rules. It said the minimum paid-up capital for such a bank would be Rs 100 crore, of which the promoters’ contribution would be at least 40 per cent. A payment banks can accept current and savings bank deposits, and take payments and remittance services through various channels, including branches, banking correspondents and mobile banking.

The executive quoted earlier said apart from charging transaction fees, the group would  benefit in the form of customer additions, growth in its business and so on. “We deal with 30 crore customers in over 100 cities. We can easily do money transfer and deposit taking. We already have the space and set-up in place,” the executive said.

Analysts say banking will be an added advantage for the company. “They can earn some revenues from this stream. Since they have a good distribution network and a known brand, they can easily do it,” said Abneesh Roy, associate director, institutional equities research, Edelweiss Securities. “But I do not see any cash flow improvement, as they cannot lend money.”

Most of the other big retailers spoken to, such as Spencer's and D Mart, said they'd not studied the RBI notification and wouldn't comment on the matter.