MUMBAI: Soon, you can pay electricity bills or transfer cash from nearby kirana stores or panchayat offices with Reserve Bank of India, on Wednesday, granting ‘in-principle’ approval to 11 out of the 41 applicants to set up payments banks — first such differentiated banks in the country.
“The ‘in-principle’ approval granted will be valid for a period of 18 months, during which time the applicants have to comply with the requirements under the guidelines and fulfil the other conditions as may be stipulated by the Reserve Bank,” the apex bank said in a statement.
It added that the central bank would use the learning from this licencing round to appropriately revise the guidelines and move to give licences more regularly, virtually ‘on tap’.
Draft guidelines for payments banks were issued last November. The idea is to encourage small savings, meet credit and remittance needs of migrant work force, small businesses, unorganised sector, low income households and farmers in underbanked locations. Payments banks are expected to make financial transactions like utility bills — currently possible via internet or at physical centres — and banking services like cash deposits or ATM transactions — now done at brick-and-mortar branches — accessible.
According to the World Bank, only 35 per cent have access to banking and financial services. The country’s 89 public, private and foreign banks, between them have set up 2,33,658 branches. But of this, only 71,091 branches are located in rural areas as on March, 2013.
“The payments bank licence will enable us to build our existing M-Pesa base further and offer a comprehensive portfolio of banking and financial products and services, accelerating India’s journey into a cashless economy,” said Sunil Sood, MD & CEO, Vodafone India.
Meanwhile, RBI said, on fulfilling the requisite ‘in-principle’ conditions, it will consider granting them licences to commence banking business. Until a regular licence is issued, the applicants can not undertake any banking business.
Differentiated banking entails going beyond the current universal banking framework to serve specific purposes. The move to allow them came after RBI found just two entities — IDFC and Bandhan from over 24 applicants — eligible for setting up commercial banks. The central bank issued this limited licences on April 1, 2014 after a decade.
Both applicants are yet to start operations even after a year as they have time till October.