(NEW DELHI) India’s central bank on Wednesday gave “in-principle” approval to 11 applicants seeking to start so-called payments banks that would take deposits and handle cash transfers, as it seeks to expand access to financial services for the country’s poor.
Among the winners were mobile-payments arms of three telecommunications companies as well as the country’s postal service and the chief executive officer of e-commerce company One97 Communications Ltd., which owns Paytm, a mobile-marketplace and payments company. They and the others granted approval have 18 months to comply with regulatory guidelines before they will be granted licenses, the Reserve Bank of India said.
India’s government has mounted a major campaign to bring more people in the world’s second-most populous country into the formal financial system—opening bank accounts for more than 170 million people since August, according to Prime Minister Narendra Modi.
The Centre for Monitoring Indian Economy estimates that as of December, around 43% of Indians had bank accounts. The central bank’s hope is that payments banks and another new category of financial institution, “small banks,” will help reach poorer Indians, especially in rural areas.
Payments banks, which will be able to accept deposits of around $1,500 from customers, will specialize in tasks such as handling remittances for migrant workers and, as their name suggests, facilitating payments, primarily for low-income households and small businesses.
For mobile-payments companies, a payments-bank license would mean they could operate less like cash-transfer service Western Union and more like a bank.
Sunil Sood, the CEO of Vodafone India, said the approval received Wednesday by the company’s M-Pesa payments unit would allow it to “offer a more comprehensive portfolio of banking and financial products and services, accelerating India’s journey into a cashless economy.”
One97’s Paytm also said a license would help it offer a broader range of financial services, something that could boost its e-commerce business.
“By 2020, we will bring half a billion Indians to the Paytm platform,” said Vijay Shekhar Sharma, One97’s CEO. “We want to be the most dominant financial-services player in the country.”
Paytm has 100 million mobile-wallet customers. As a payments bank, Paytm would be able to let users withdraw cash from their accounts.
Paytm is in some ways modeling itself on China’s Alibaba Group, whose financial-services arm, Zhejiang Ant Small & Micro Financial Services Group, commonly known as Ant Financial, last year won a Chinese banking license. Ant Financial owns 25% of One97.
Paytm’s larger Indian e-commerce rivals Flipkart Internet Pvt. and Jasper Infotech Pvt.’s Snapdeal also have made recent investments in financial services.
The companies that received approvals were: Aditya Birla Nuvo Ltd., Airtel M Commerce Services Ltd., Cholamandalam Distribution Services Ltd., Fino PayTech Ltd., National Securities Depository Ltd., Reliance Industries Ltd., Tech Mahindra Ltd. and Vodafone M-pesa Ltd.
In addition, the Department of Posts—part of the government—and two individuals, Dilip Shanghvi, managing director of Sun Pharmaceutical Industries Ltd., and One97’s Mr. Sharma also got central bank’s approvals.