Suitors line up for small finance and payment banks

Suitors line up for small finance and payment banks

Payment solutions providers Itzcash and Oxigen, business correspondent company Fino have expressed interest in payments bank licence while Muthoot Finance and Shriram Capital may apply for small finance banking licence.

With the RBI issuing final licensing norms for small finance and payment banks, a host of potential suitors including Shriram Capital and Muthoot Finance on Thursday evinced initial interest in setting up such niche entities.

However, they will take a final call on applying to RBI for such licences after going through the fineprints of the guidelines, which were released in the evening.

Those having expressed their interest in seeking payment bank license included payment solutions providers Itzcash and Oxigen, business correspondent company Fino, while Muthoot Finance and Shriram Capital may apply for small finance banking licence.

"We will definitely apply for payment banks licence. It is a good beginning. There have been very positive changes in the guidelines but in some we need more clarity," Oxigen Indian Private Limited Founder and Managing Director Pramod Saxena told PTI.

Itzcash Card's Managing director Naveen Surya said,"We are keen on applying for Payment Bank. We could deliver more products and this will also help in improving our portfolio."

Fino's COO and ED Rishi Gupta said the business correspondent company is keen to enter the payment bank fray and is encouraged by the clarity in the final guidelines on factors such as listing and selling of third party products.

NBFC lender Shriram Capital is much more keen on the Small Finance Bank and will be studying the fine print before making an application, its group director G S Sundararajan said.

Gold loans provider Muthoot Finance's director Thomas George Muthoot said the company is interested in applying for small finance banks and will be studying the guidelines.

The SFB is an experiment around the community banking in US and may need time to stabilise, said Ashvin Parekh, who runs an advisory firm, said. He, however, added that one needs to wait and watch regarding the efficacy because of the not so successful experience with the LAB (Local Area Banks).

Parekh expressed concerns over the viability of the Payment Banks which have to depend on fees alone for their revenues, but said companies like those in telecom may be interested.

Ushering in a new era of differentiated banks, the Reserve Bank on Thursday issued final guidelines for licensing of Small Finance Banks (SFB) to serve the marginalised, and Payments Banks (PB) to garner savings and help in remitttances.

The minimum capital requirement for both the sets of banks, introduced to deepen financial inclusion, has been kept at Rs 100 crore and the RBI has allowed a diverse set of promoters to enter the fray.

The SFB will be miniature versions of the currently operational universal banks and will be undertaking all the activities like accepting deposits and lending, but with a focus on the under served people.

The PBs will not be able to lend and have been structured to primarily tap the savings of people and help in the remittances.

Both these two categories of banks trace their roots to an August 2013 discussion paper on banking in the country, which broached the idea of differentiated banks where licenses will be available on tap, rather than the current piece where RBI has issued new licenses for the universal banks once every decade.

At present, apart from the universal banks, we have local area banks and cooperative banks which are operational in the country. Apart from that, there are non bank financial companies (NBFCs) and micro lenders.

In both the types of banks, the RBI has laid thrust on extensive use of technology saying it will help in the ultimate goal of financial inclusion sought to being achieved through the new banks.

The RBI had issued draft guidelines for both the banks on July 17 and then invited comments on the same. A majority of analysts said the RBI has accomodated the views of the industry in the final guidelines, pointing to moves like allowing cross border remittances for PBs.

India Ratings' senior director Ananda Bhoumik said the NBFCs will be keen to enter the SFB business, getting attracted by the liabilities side, while different players like telecom companies and business correspondents will be keen to enter PBs.

The SFBs, which can be promoted by non bank lenders, MFIs and LABs, will serve underserved or unserved population and also small businesses. The PBs will garner the savings and have been given an upper cap of Rs 1 lakh per account. They will also help in remittances across channels like internet banking, mobile banking etc.

The SFB will have to set aside money for CRR and SLR at par with a commercial bank, while the priority sector lending (PSL) piece has been set at 50 per cent. The PBs will have to invest 75 per cent of their deposits in government securities and the remaining will have to be parked with commercial banks for liquidity functions, the RBI said.