State-owned India Post - which is the favourite for financial inclusion -- is likely to get a nod as a differentiated ‘Payment’ bank in the coming month-end as the Finance Ministry completes the guidelines for differentiated banking operations. India Post had earlier applied for bank licence under universal banking category and in the April round of new banking licences was not given clearance by the RBI.
‘’India Post can best carry out operations as a payment bank and it needs to project itself as sush now as the RBI has opened up the banking licences and made it available on tap” AP Hota, CEO and MD of National Payments Corporation of India told The Pioneer. NPCI is the nodal agency set up by RBI to provide and monitor retial payments through various gateways in India as well as overseas. Payment banks can only do rudimentary functions of a commercial bank as they cannot do credit or lending or other financial services that a normal commerical bank would do.”The Government is considering this matter as consultation is going on,” added Hota.
While issuing the licences in April, RBI had said that it would consider India Post’s application separately in consultation with the Government. Rajan had earlier said that India Post could begin as a payments bank.
In April, RBI had issued in-principle approval for IDFC ltd and Bandhan Financial Services Pvt. ltd to set up commercial banks. A total of two dozen entities were in the race for new banking licences. These included Reliance Capital ltd, Bajaj Finserv ltd, Aditya Birla Nuvo ltd, l&T Finance Holdings ltd, lIC Housing Finance ltd, Muthoot Finance ltd and India Post. From these, two parties had already exited the race. RBI governor has already indicated that IndiaPost could be considerd to start operations as a payment bank.
RBI Governor Raghuram Rajan had indicated that the central bank would start the process of issuing banking licences soon on tap. The apex bank will also issue licences on a continuous basis to qualified aspirants instead of opening the licensing window after long intervals, as per Rajan. However, the Government is yet to come out with the draft guidelines on differentiated banking which the Department of Financial Services has said would be done as soon as possible as many of the rejected aspirants for the banking licences were keen to apply for payment or differentiated banks licences.
RBI is keen on promoting differentiated banking in India like payment banking and enhance its financial inclusion targets in the non banked rural areas of the country. Towards this, RBI has set up a Nachiket Mor commitee, which has recommnded that smaller financial NBFCs can start operations even wil small capital of Rs 50 crore to start payment banks.The RBI had later mmodified the llimit to Rs 100 crore only.
The Mor committee had also recommended permitting existing banks to create subsidiaries to operate payments banks. later, Mor had clarified that payments banks may be created by converting prepaid payment issuers (PPIs). These companies provide cards that customers can use to make payments with the money equivalent.
There are 27 PPIs in the country, including Itz Cash Card ltd, Oxigen Services (India) Pvt. ltd and Airtel mCommerce Services ltd. The entry of payments banks is also seen as a step closer to moving towards a differentiated banking licence setup. However, these facilities have to go through the monitoring of NCPI which is the final authority on granting the clearance to these payment gateways in India.
The payment banks, however, will be required to comply with all RBI guidelines as for commercial banks. The payments bank route is critical for India Post, which failed to secure a banking licence.