Reliance, Birla join the payment bank rush

Some of India’s top business houses such as Reliance Industries Ltd (RIL) and Aditya Birla Group are among about 100 entities that have applied for payment and small bank licences, the application deadline for which ended on Monday. Bharti Airtel was the first to announce plans for a payment bank licence, through an association with Kotak Mahindra Bank, on Thursday.

Those who applied to the Reserve Bank of India (RBI) for small bank licences included Nirmal Jain-led IIFL Holdings Ltd, UAE Exchange, Kerala-based ESAF Microfinance, Punjab-based Capital Area Local Bank and Andhra Pradesh-based Coastal local Area Bank.

While the central bank did not come out with a list of applicants, sources familiar with the developments said the licences would be issued in six months, after an external committee considered all the applications. The names of the committee members will be announced on Tuesday.

RIL, India’s largest private sector group, said it had set up a joint venture with State Bank of India (SBI), the country’s largest bank, which would hold up to 30 per cent stake. “The payment bank will leverage SBI’s nationwide distribution network and risk-management capabilities, along with the substantial investments made by RIL in its retail and telecom businesses,” RIL said, adding it would deploy state-of-the-art technology and build scalable infrastructure.

S Sriram, managing director (national banking group), SBI, told Business Standard the crucial element in payment bank operations was a robust technology backbone for remittance business. The proposed bank intends to cover 250,000 villages and 5,000 towns in three years. While it plans to start with a Rs 100-crore capital base, this will be ramped up to Rs 400 crore in three-four years, depending on business volumes.

Aditya Birla Nuvo, the largest shareholder in Idea Cellular, plans to own 51 per cent of its proposed payment bank, while Idea will own the rest. Later, Idea could raise its holding to 60 per cent.

Kishore Biyani’s Future Group said the banking entity, to be called NuFuture Payments Bank, would work towards extending RBI’s mandate of financial inclusion by focusing on the group’s core consumer groups that included women, migrant workers, self-employed people, farmers and local entrepreneurs from the group’s sourcing base. Future Group has joined hands with IDFC, which is to become a universal bank in October 2015, for a payment bank licence. IDFC will pick up stake in the new entity, should it get a payment bank licence.