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Telenor Financial Services, IDFC Bank and Dilip Shanghvi on Friday announced the withdrawal of their ongoing efforts to form a payments bank venture in India. The companies, however, did not specify the reasons for nixing the payments bank plan.
Dilip Shantilal Shanghvi (founder of Sun Pharmaceutical Industries) was one of the 11 entities that had received ‘in-principle’ approval from the Reserve Bank of India (RBI) to set up payments banks, in August 2015. With Shanghvi surrendering his permit, nine out of the 11 entities remain in the fray.
In March, Cholamandalam Distribution Services Ltd had withdrawn its subsidiary, Cholamandalam Distribution Services, from the payments bank race.
Among others, the RBI had granted ‘in-principle’ approval to Aditya Birla Nuvo, Airtel M Commerce Services, Department of Posts, Reliance Industries, Tech Mahindra, and Vodafone m-pesa to float payment banks.
In a joint statement, Telenor Financial Services, IDFC Bank and Dilip Shanghvi said: “This decision, collectively made by the three partners, will be communicated to the RBI. Consequently, the payments bank licence will not be pursued.” According to the statement, during the past eight months, representatives of these three partners have worked together to establish relevant frameworks and a governance structure for the proposed joint venture (JV).
“Telenor Financial Services and IDFC Bank have rich experience from offering financial services and the intention of the JV was to combine our expertise to launch a robust payment bank service in India. Following the mutual decision to withdraw these plans, the payment bank licence will not be pursued,” said Dilip Shanghvi.
According to industry experts, some applicants may have overestimated the market potential and under-estimated the scope of the rollout.
The objective of setting up a payments bank is to further financial inclusion by providing small savings accounts and payments/remittance services to migrant labourers, low-income households, small businesses, other unorganised sector entities and other users.
They cannot undertake lending activities. The minimum paid-up equity capital for payments banks is ₹100 crore.
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