Payments banks' aspirants expect RBI to be more liberal in granting licences

Low risk, RBI's objective of financial inclusion boost hope

Payments bank aspirants expect the Reserve Bank of India (RBI) to be liberal and grant licences to at least 10 of the 41 applicants that have applied for one.

RBI was cautious while granting universal bank licences during the round in April last year. Only two — IDFC and Bandhan Financial Services — among the 26 applicants were allowed to start operations.

“We believe RBI may be more stringent in issuing licences for small finance banks. But since the risks involved in the case of payments banks is less, the number can go up to even 10,” said K R Bijimon, chief general manager, Muthoot Finance, a non-banking financial company mainly involved in gold loans.

Muthoot has applied for a payments bank licence.

According to the norms, payments banks are not allowed to lend and will have to invest a minimum of 75 per cent of its demand deposits in government bonds with maturity up to one year.

A maximum 25 per cent of its deposits could be kept in fixed, time deposits of banks. In addition, payments banks are not allowed to take deposits of more than Rs 1 lakh per customer. This makes payments banks much less riskier than universal banks.

“Though the regulator has not given any clarity on the number of licences that are going to be granted but we believe the number to be around six to eight. We believe that they may select one player from each category of applications — telcos, pre-paid instrument players, retailers, technology players etc,” said Pramod Saxena, chairman and managing director, Oxigen, which has also applied for a payments bank licence and will be partnering with RBL Bank (erstwhile Ratnakar Bank) for it.

“Considering payments banks are not allowed to lend the risk comes down automatically. Therefore, we believe all the players that fit the criteria given by RBI should be given a licence,” said Naveen Surya, managing director, ItzCash.

The RBI had initiated the idea of small and payments banks to further the cause of financial inclusion.

This is yet another reason players feel that a higher number of licences should be issued.

“The main idea for setting up payment banks is financial inclusion. Therefore, it will be difficult to achieve that objective with only a couple of players. That is another reason why we believe that more number of licences will be issued,” said Rishi Gupta, the chief operating officer and executive director of Fino PayTech.

Several corporate giants such as Reliance Industries, Bharti Airtel, Aditya Birla Group, Future Group, and Vodafone are also in the race to get a licence for payments banks. Even lenders such as ICICI Bank, Kotak Mahindra Bank and Axis Bank have expressed an interest to partner with the applicants.

Though a final time frame for issuing licences has not been given by the central bank but few players have been given to understand that the in-principal approval is likely to be given within a period of three to four months.