Airtel gets final license for payment bank
Bharti Airtel's unit, Airtel M-commerce Services Ltd. (AMSL), has received the final payment bank license from the Reserve Bank of India (RBI). Airtel was among the 11 entities who had received in-principle approval from RBI in August 2015 to start payment banks. Bharti Airtel plans to set upthe payment bank in partnership with Kotak Mahindra Bank which already owns 19.9% in AMSL.
Payment banks in simple terms are trimmed down versions of banks which can receive payments, remittances, offer basic saving and deposit services, etc. However, unlike full-fledged banks, payment banks cannot advance loans. The concept of payment banks was mooted to further the goal of financial inclusion as normal banks have restrictions in terms of reach and access to people, especially in remote areas.
Payment banks, a type of differentiated banks, are expected to redefine the banking system in the country by offering low-cost services to labourers, migrants, low-income households, small businesses, etc. which were hitherto unavailable to them. Payment banks can accept deposit up to Rs.1 lacs from customers and offer interests on them. While they cannot issue credit cards, they can offer ATM and debit cards.
Airtel M-Commerce Services Ltd. (AMSL) was a wholly owned subsidiary of Bharti Airtel, before Kotak Mahindra picked up 19.9% stake in AMSL in February 2015 for Rs.98.4 crores. AMSL already offers mobile money services under the brand name Airtel Money since 2011. Bharti Airtel is the largest telecom service provider with 245 million customers while Kotak Mahindra is the 4th largest private sector bank.
According to the RBI guidelines, a scheduled commercial bank cannot have more than 30% stake in a payment bank. However, if a bank owns more than 20% then it is viewed as co-promoter which creates difficulty in getting a license.
To further the agenda of financial inclusion and offer differentiated banking services, the RBI gave in-principle approval to 11 payment banks. The list includes Reliance Industries, Aditya Birla Nuvo, Vodafone, Airtel, Sun Pharma's Dilip Shanghvi, Paytm's Vijay Shekhar Sharma, etc. Payment banks require a minimum capital of Rs.100 crores and have to be set up within 18 months of receiving RBI approval.