The Reserve Bank of India or RBI (the country’s Central Bank) has announced the awarding of 11 new payment bank licenses to a range of non-traditional players including telcos, tech firms and the country’s postal service as it seeks to improve competition and financial inclusion in the country. According to the RBI, Payment banks will be able to take deposits of up to around $1,500, issue debit and ATM cards, and facilitate online transactions but specifically prohibited form lending activities.
According to the RBI, competition for the new licenses was strong with 41 applications of which 11 were accepted and now have 18 months to meet regulations before getting full licenses. Among the successful applicants were Vodafone and Bharti Airtel, tech firms Fino PayTech and Tech Mahindra, the country’s postal service and Vijay Shekhar Sharma, founder of the country’s most popular mobile wallet solution, Paytm.
As part of the deal to obtain licenses, the RBI says that the
“selected applicants have the reach and the technological and financial strength to service hitherto excluded customers across the country,” highlighting the importance of financial inclusion.
The move by the RBI has long been expected and more payment bank licenses are set to be issued in the near future marking a significant point in the development of India’s electronic payment maturity. While these new payment banks won’t be able to solve India’s vast unbanked population issue, it is a step in the right direction and will also increase competition among existing players in the banked mainstream.
Overview by Tristan Hugo-Webb, Associate Director, Global Payments Advisory Service at Mercator Advisory Group
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