RBI Approval for 11 Payment Banks

Paving the way for revolutionising cashless payments services in the country, the Reserve Bank of India granted payment bank licences to 11 firms. This includes telecom companies Vodafone and Airtel; non-banking financial company Cholamandalam Distribution Services Ltd; large conglomerates Reliance Industries and Aditya Birla Nuvo; and individuals Vijay Shekhar Sharma, founder of Paytm, and Dilip Shanghvi, Managing Director of Sun Pharmaceuticals. The Department of Posts, Fino Paytech, Tech Mahindra and National Securities Depository Ltd also made the cut.

• Of the 41 entities that applied for a licence, the prominent names that did not make it in this round include Future Group Founder Kishore Biyani, Videocon D2H and MG George Muthoot.
  
  
• Payments banks differ from conventional banks as they are not allowed to lend to customers or issue credit cards.
  
  
• They can accept deposits of up to ₹1 lakh and can offer current and savings account deposits.
  
  
• They can also issue debit cards and offer internet banking.
  
  
• While the 11 companies have been given 18 months to comply with all the conditions laid out by the RBI, most of them have already put in place a robust roll-out plan.
  
  
• Telecom operators with their vast retail presence would be the first off the block.

Selection Process

• First, a detailed scrutiny was undertaken by an External Advisory Committee (EAC) under the Chairmanship of Dr. Nachiket Mor, Director, Central Board of the Reserve Bank of India.
  
  
• The recommendations of the EAC were an input to an Internal Screening Committee (ISC), consisting of the Governor and the four Deputy Governors.
  
  
• This Internal Screening Committee prepared a final list of recommendations for the Committee of the Central Board (CCB), after independently scrutinising all the applications.
  
  
• At its meeting on August 19, 2015, the CCB went through the applications, informed by the recommendations of the EAC and the ISC, and approved the announced list of applicants.
  
  
• In arriving at the final list, the CCB noted that it would be difficult at this stage to forecast the most successful likely model in the emerging business of payments.
  
  
• The CCB further noted that payments banks cannot undertake lending, and therefore believed that the payments bank would not be subject to the same risks as a full service bank.
  
  
• Therefore, the CCB evaluated applicants to assess whether there would be unacceptable risk even to the narrower functions of a payments bank.
  
  
• It has selected entities with experience in different sectors and with different capabilities so that different models could be tried.
  
  
• It did ensure that all the selected applicants have the reach and the technological and financial strength to service hitherto excluded customers across the country.