Ambanis, Birlas, Mittals join race for niche bank licences

Big corporate houses including RIL, Aditya Birla Group, Airtel and Future Group have joined the race for payment bank licence while a number of entities have also applied for setting up small finance banks.

The deadlines for seeking both kinds of niche banking licences ended today and a final call would be taken on the applications by the RBI in due course.

Those having applied for small finance bank licence include SKS Microfinance, UAE Exchange India, Dewan Housing Finance and SE Investments. RBI has introduced these two niche banking categories to push forward financial inclusion and boost savings habits.

Reliance Industries today joined hands with state-run behemoth SBI, while Bharti Airtel has partnered Kotak Mahindra Bank for seeking payments bank licences.

Besides, Aditya Birla Nuvo Ltd (ABNL) -- which runs mobile operator Idea Cellular -- and Kishore Biyani-promoted Future Group too applied for the same during the day.

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

Others having sought payment bank license include Fino Paytech and Vakarangee, while sources said that telecom major Vodafone has also submitted its application.

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 including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.

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.

IIFL Holdings Ltd has also submitted an application to the RBI for a licence for setting up small finance bank.

Muthoot Fincorp Ltd, which was planning to apply for small finance bank, has opted out due to lack of clarity over some issues.

"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.

Kishore Biyani-promoted Future Group said it plans to operate the payment bank, if granted by RBI, through a separate company, 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 simple 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 guidelines, 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 other conditions.

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 five years from the commencement of its business.

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