Ambanis, Birlas, Mittals Join Race for Niche Bank Licences

New Delhi
Ambanis, Birlas, Mittals Join Race for Niche Bank Licences

Big corporates like RIL, Aditya Birla, Airtel and Future groups are among at least a dozen entities that have sought licence from RBI to set up payment or small finance banks, two niche banking models introduced to push financial inclusion and saving habits.

The deadline for submitting the applications with RBI for such licenses ended today and a final call on these would be taken by the central bank in due course.

To foray into banking business through payments banks route, Mukesh Ambani-led Reliance Industries has managed a sort of coup by partnering banking behemoth SBI, the only state-run entity in the fray.

Bharti Airtel has signed on private sector lender Kotak Mahindra Bank as a partner for its own payments bank, while Kishore Biyani-led Future Group has teamed up with IDFC, which was given full-fledged banking licence in April last year but is yet to make that venture operational.

Those having applied for setting up small finance banks include micro-lender SKS Microfinance, brokerage firm India Infoline, remittance provider UAE Exchange, home loan provider Dewan Housing Finance and SE Investments.

The applicants for payments bank category also include Fino Paytech and Vakrangee, while sources said that there are some more entities in the fray including telecom giant Vodafone.

Some of the applicants, including Aditya Birla Group, India Infoline and UAE Exchange had also applied for full-fledged banking licenses to RBI in 2013, but their applications failed to pass the muster.

Kumar Mangalam Birla-led Group has made its fresh application through AV Birla Aditya Birla Nuvo Ltd (ABNL), in partnership with its telecom venture Idea Cellular.

The exact number of applicants in both the categories is yet to be made public by the RBI.

Payment banks would be allowed payments and remittance services through various channels. However, such lenders, cannot issue credit cards or undertake lending activities.

Small finance bank will primarily undertake basic banking activities of acceptance of deposits and lending to unserved and under-served sections.

Last year, RBI issued license to IDFC and Bandhan to set up full-fledged banks in first licenses, while initially 26 entities had applied including Tata group, Reliance Group, L&T and Bajaj among others.

A few entities, including Muthoot Fincorp and Shriram Groups decided against submitting their applications. Sources said that other banking aspirants, including Anil Ambani-led Reliance Group would prefer applying for full-fledged banking license after more clarity on regulations.

"The RBI guidelines says we have to convert the current business into small finance business. We are not sure how it will play out," said Muthoot Fincorp Executive Director Thomas Muthoot.

Shriram Group, which had also shown its intent to apply for small finance bank, has decided not to apply, its group director G S Sundararajan said.

Meanwhile, RIL said it will be the operator of the joint venture where SBI will hold 30 per cent stake.

The RIL-SBI joint venture seeks to leverage the nation's largest lender's nationwide distribution network and risk management capabilities along with the substantial investments made by RIL in its retail and telecom businesses.

Future Group said it plans to operate the payment bank, if granted by RBI, via a separate firm NuFuture Payments Bank.

The company said the proposed Payments Bank will leverage Future Group's extensive presence across the country to reach out to depositors through its physical presence in 168 cities across the country and rural locations in Gujarat and Punjab through its retail networks.

Aditya Birla Nuvo Ltd (ABNL) said it will be the promoter of the proposed payments bank holding 51 per cent equity capital. Idea Cellular Ltd will hold the balance 49 per cent.

The company added that "the Board of Directors of ABNL has also approved that equity participation of Idea may be increased up to 60 per cent, if permitted, from time to time with approval of regulatory bodies as applicable."

As per RBI guidelines on Payments Bank, they can raise deposits of up to Rs 1 lakh per individual, issue ATM/debit cards and sell financial products such as mutual funds and insurance products. They, however, cannot issue credit cards.

Mobile firms and supermarket chains are among those allowed to set up payment banks.

Among others, existing NBFCs and micro finance lenders have been allowed to set up small finance banks, while large public sector enterprises and big industrial houses cannot establish such banking entities.

As per the norms, those seeking to set up these two new categories of banks need minimum Rs 100 crore of capital and fulfil the necessary 'fit and proper' criteria, among others.

The promoter's minimum initial contribution to the paid up equity capital of such payments bank will at least be 40 per cent for the first 5 years from commencement of business.

Foreign holdings in both payment banks and small finance banks would be allowed as per the applicable FDI limits for private banking sector.

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