Payments banks to strengthen financial ecosystem: Kochhar

With RBI announcing 11 licences for payments banks, top private sector lender ICICI Bank today said the entry of these new entities would strengthen the overall financial ecosystem and also benefit existing banks.

ICICI Bank has investments in two of the 11 entities that have got in-principle approval for setting up payments banks.

"We have tie-ups in two of the payment banks announced. We will watch the progress in both and will continue to move forward," ICICI Bank's CEO and Managing Director Chanda Kochhar said here.

She was replying to a query on of the two who it will formally tie-up with for payments bank.

Kochhar said the payments bank will play a complimentary role in the banking system and the universal banks like ICICI Bank stand to gain from their entry.

"The entry of new players will enhance the financial ecosystem and will also make existing banks technology savvy and get them to come out with new products," she said.

She said all the services which would be undertaken by the payments bank are already done by the universal banks and added that ICICI Bank also has a dedicated digital channel called Pockets, which has had one million downloads.

The RBI yesterday gave in-principle nods to 11 entities, including those floated by Reliance Industries, Aditya Birla Group and Airtel, to become payments bank and gave them 18 months to put a detailed plan.

Kochhar said ICICI Bank is witnessing a pick-up from the retail segment including both mortgage and auto loans, and added that heavy commercial vehicles are also reporting loan demand.

On transmission of RBI's policy rate cuts into lending rates, Kochhar said there can never be an equal cut at the bank's end and added that it has passed the benefit with the revision of 0.30 per cent.

Stating that only 60 per cent of a bank's deposit base is from term deposits, which get repriced with deposit rate cuts.

"A 75 basis points cut translates into 40-45 basis points cut in Cost of Funds for banks. You have already seen a 30 basis points cut.

Transmission will never be a one is to one correlation with monetary policy rates," she said.

On the future trajectory of deposit rates, she said the small savings rates have a bearing on it and banks cannot get it down faster.