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Banking revolution on cards: RBI clears 11 payments banks
MUMBAI: Banking, as we have known it, appears headed for an upheaval. The Reserve Bank of India on Wednesday 'in principle' cleared 11 entities - including department of posts, top conglomerates such as Reliance Industries and Aditya Birla Group, telecom giants like Airtel and Vodafone, and a number of tech and finance companies - to set up 'payments banks'.
READ MORE: New entities will bank on mobiles, net
Unlike 'universal banks' - as the regular banks are called - payments banks can accept deposits up to only Rs 1 lakh and cannot grant loans. They can only deposit their money in government bonds. They can issue debit cards but not credit cards. Other than this they can provide all the services of a universal bank.
Ever since the first round of bank nationalization in 1969, only two private business groups have been allowed to promote a bank. Although most corporate houses had applied for a universal bank licence, they all drew a blank, with only IDFC and Bandhan Microfinance being granted licences earlier this year.
Payments banks will largely depend on mobile and ATM infrastructure to provide transaction banking services. Opening an account is expected to be like acquiring a pre-paid mobile number. Analysts expect intense competition, which should drive down charges for remittances, fund transfers and other banking transactions. Customers who do not have the means to maintain minimum balance will be welcomed into these banks as revenue will be earned through transaction charges and not on the spread of interest between deposits and loans.
READ ALSO: After RBI nod, Reliance, Airtel, Vodafone to set up payments banks soon
What makes this round of licensing disruptive is that it brings together giants from across industries. For instance, the new payments bank to be set up by the department of posts will have access to the 1.55 lakh post offices across the country. State Bank of India will pick up a 30% stake in RIL's bank which will use Reliance Jio's 4G network to provide banking services. Airtel has the backing of Kotak Bank, which will hold a 19.9% stake in the proposed bank.
Announcing the list of successful applicants, RBI said that at this stage it would be difficult to predict which model will be successful in the emerging business of payments. The committee of the central board, which decided the final shortlist from among 41 applicants, chose entities with experience in different sectors and with different capabilities so that different models could be tried.
Besides the five named earlier, the successful applicants are National Securities Depository, Tech Mahindra, Sun Pharma promoter Dilip Shanghvi, Paytm founder Vijay Shekhar Sharma, Cholamandalam Distribution Services, and Fino PayTech. The unsuccessful 30 include Videocon and Kishore Biyani, Vakrangee Software and a host of digital payment companies. RBI has however said that it will use the learnings of this round of licensing and in future grant permissions 'on tap'.
"The in-principle approval granted will be valid for a period of 18 months, during which time the applicants have to comply with the requirements under the guidelines and fulfil the other conditions as may be stipulated by RBI," the central bank said in a statement. On being satisfied that the applicants have complied with the requisite conditions laid down by it as part of in-principle approval, RBI would grant a banking licence.
READ MORE: New entities will bank on mobiles, net
Unlike 'universal banks' - as the regular banks are called - payments banks can accept deposits up to only Rs 1 lakh and cannot grant loans. They can only deposit their money in government bonds. They can issue debit cards but not credit cards. Other than this they can provide all the services of a universal bank.
Payments banks will largely depend on mobile and ATM infrastructure to provide transaction banking services. Opening an account is expected to be like acquiring a pre-paid mobile number. Analysts expect intense competition, which should drive down charges for remittances, fund transfers and other banking transactions. Customers who do not have the means to maintain minimum balance will be welcomed into these banks as revenue will be earned through transaction charges and not on the spread of interest between deposits and loans.
READ ALSO: After RBI nod, Reliance, Airtel, Vodafone to set up payments banks soon
What makes this round of licensing disruptive is that it brings together giants from across industries. For instance, the new payments bank to be set up by the department of posts will have access to the 1.55 lakh post offices across the country. State Bank of India will pick up a 30% stake in RIL's bank which will use Reliance Jio's 4G network to provide banking services. Airtel has the backing of Kotak Bank, which will hold a 19.9% stake in the proposed bank.
Announcing the list of successful applicants, RBI said that at this stage it would be difficult to predict which model will be successful in the emerging business of payments. The committee of the central board, which decided the final shortlist from among 41 applicants, chose entities with experience in different sectors and with different capabilities so that different models could be tried.
Besides the five named earlier, the successful applicants are National Securities Depository, Tech Mahindra, Sun Pharma promoter Dilip Shanghvi, Paytm founder Vijay Shekhar Sharma, Cholamandalam Distribution Services, and Fino PayTech. The unsuccessful 30 include Videocon and Kishore Biyani, Vakrangee Software and a host of digital payment companies. RBI has however said that it will use the learnings of this round of licensing and in future grant permissions 'on tap'.
"The in-principle approval granted will be valid for a period of 18 months, during which time the applicants have to comply with the requirements under the guidelines and fulfil the other conditions as may be stipulated by RBI," the central bank said in a statement. On being satisfied that the applicants have complied with the requisite conditions laid down by it as part of in-principle approval, RBI would grant a banking licence.
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Prajwal Poojary•5 hours ago
Smart way to clear the black money without any issues. Advantage is that India gets its money back, silence prevailed. Well done. Appreciated.
8 0 •Reply•Flag
Black money is not in liquid cash, it has already been invested, mainly in Gold, real estate invest and majority of amount came back via Mauritus, which was sent out of India thru Hawala, even if tried hard Govt. cannot get liquid Black money,they may catch hold persons who have or had accounts aboroad but will get substantially low amount than presume.
4 0 •Reply•Flag
Black money is the undeclared money. Mainly it moves as cash and spent out and a portion is converted from black to white;E'c immovable property bought at below market rate in benami's name in relatives name, received as gift etc. At transaction level it is only cash. Unless the Govt is honest and the tax system is genuine black money will always be generated. See the Stock market operation. Govt extracts money in the form of transaction tax, service tax without doing anything for the investors. ... Read More
2 0 •Reply•Flag
Black money has been invested in property sir.
4 0 •Reply•Flag
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Good move. RBI has now given push to more competition in Banking
3 1 •Reply•Flag
Rather allowed swindling by the privates and the ever bullying business house !
0 0 •Reply•Flag
reliance ka bank... public ko kab akal aayegi... kal hi cag ne bataya hai kaise reliance humain loot rahi hai...
2 0 •Reply•Flag
Reliance ka Electricity distribution in Delhi, did terrible for public, and good for themselves. Open loot ..
1 1 •Reply•Flag
Ranjeev Saluja• Jay K•36 mins ago
perhaps you have forgotten the long power cuts during DESU times.
0 0 •Reply•Flag
Had they excluded them, then it was justifiable. But their inclusion makes one to doubt, as if to include them first, they listed others !
0 0 •Reply•Flag
Only time will prove the true motive behind this rationale and the hidden agenda. By the time Indian citizens will come to know the hidden agenda, it will be too late for them. Some of the biggest borrowers and NPA holders have been promoted to "Banks"! Even god cannot save this nation.
2 0 •Reply•Flag
time will prove the true motive behind this rationale and the hidden agenda. By the time Indian citizens will come to know the hidden agenda, it will be too late for them.
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