HDFC Bank rules out a JV for payment bank

Other large lenders may also stay away, say analysts

HDFC Bank has become the first in the sector to rule out a joint venture partnership with any applicant for one of the proposed payment banks (PBs).

“We will not do a joint venture for this. We are a full bank ourselves and don’t need to form an alliance,” said Aditya Puri, managing director.

In final guidelines issued last week, the Reserve Bank of India has allowed entities to form an alliance with a lender to form a PB. The idea is that PBs would tap unbanked areas and such an alliance would help.  Puri said HDFC Bank was capable of tapping far-flung areas on its own. Nor does he think they pose a worry on competition. “There is enough for everyone to do. There is space for payment banks, small banks, regional rural banks and large banks to exist,” he said.

Analysts believe other large lenders might similarly not be keen on partnering with either prepaid payment issuers (such as credit cards), telecom companies or other such entities to form one of the niche banks for which RBI would invite applications.

An advisor with Indian Banks’ Association said large banks themselves have an extensive branch network to cover under-banked regions. Plus, they run the risk of a PB in which it takes a stake eating into the original business over a period.

An executive with a large public sector bank (PSB) said the coverage of under-banked regions had improved substantially through the Prime Minister’s Jan-Dhan Yojana, launched in August. This could be another factor for large banks to decline such a partnership.

Entities interested in applying said mid-sized and smaller banks were more keen to partner for a PB. Some mid-sized banks might see a benefit in sourcing deposits from uncovered regions, via PBs, a PSB executive said. Naveen Surya, managing director of Itzcash, a payment service entity, said they were exploring if they'd like to partner with a bank or not. “For the businesses keen on applying, it makes sense to partner with a bank, as it will help in Casa (current and savings accounts) addition if you partner with a lender. (Also) certain other areas such as foreign exchange remittance and treasury."

Deepak Haria, senior director, Deloitte India, said a joint venture partnership with banks would be an advantage for those applying. “Those keen to apply might not have a banking background. Having a lender as a partner can help ease out some of the operational issues that a PB might initially have,” he observed.
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• In final guidelines issued last week, RBI has allowed entities to form an alliance with a lender to form payment banks (PBs). The idea is that PBs would tap unbanked areas and such an alliance would helpc
• HDFC Bank's Managing Director Aditya Puri said the bank was capable of tapping far-flung areas on its own