Aditya Birla Group gets RBI licence to start payments bank

Aditya Birla Group gets RBI licence to start payments bank

The Aditya Birla Group today said it has received licence from the Reserve Bank of India to start payments bank. Headed by Kumar Mangalam Birla, the group's outfit Aditya Birla Nuvo had set up a 51:49 joint venture -- Aditya Birla Idea Payments Bank Ltd -- with telecom major Idea Cellular to launch payments bank services in the country. "... the Reserve Bank of India... has granted licence to Aditya Birla Idea Payments Bank Ltd to carry on the business of payments bank in India," Aditya Birla Nuvo said in a BSE filing. At present, Airtel and India Post are offering payments bank services in the country. Idea Cellular Chief Corporate Affairs Officer Rajat Mukarji had earlier said the Aditya Birla Idea Payments Bank will be launched in the first half of 2017.With the objective of deepening (गहरा) financial inclusion, RBI kicked off an era of differentiated banking by allowing SFBs (small finance banks) and PBs (payments banks) to start services. A total of 21 entities were given in-principle nod, including 11 for payments banks. Later, three entities -- Tech Mahindra, Cholamandalam Investment and Finance Company and a consortium (सहायता संघ) of Dilip Shanghvi, IDFC Bank and Telenor Financial Services -- backed out of the payments bank licensing. 

Payments banks can accept deposits from individuals and small businesses up to a maximum of Rs 1 lakh per account.

Definition of 'Payments Banks'

Definition: A payments bank is like any other bank, but operating on a smaller scale without involving any credit risk. In simple words, it can carry out most banking operations but can't advance loans or issue credit cards. It can accept demand deposits (up to Rs 1 lakh), offer remittance  (प्रेषित धन) services, mobile payments/transfers/purchases and other banking services like ATM/debit cards, net banking and third party fund transfers.

Description: In September 2013, the Reserve Bank of India constituted a committee headed by Dr Nachiket Mor to study 'Comprehensive financial services for small businesses and low income households'. The objective of the committee was to propose measures for achieving financial inclusion and increased access to financial services. The committee submitted its report to RBI in January 2014. One of the key suggestions of the committee was to introduce specialised banks or 'payments bank' to cater to the lower income groups and small businesses so that by January 1, 2016 each Indian resident can have a global bank account. 

Why payments banks? The main objective of payments bank is to widen the spread of payment and financial services to small business, low-income households, migrant labour workforce in secured technology-driven environment. With payments banks, RBI seeks to increase the penetration (प्रवेश )level of financial services to the remote areas of the country. Existing prepaid payment instruments (PPI model) like Airtel Money does not give pay any interest on deposits.