Tag: payments banks

MUMBAI: Payments banks promoted by corporates will not be eligible to seek a transition to a small finance bank with the Reserve Bank of India not accepting the internal working group proposal on bank licenses for corporates.

Of the payments banks that are already licensed, Airtel Payments Bank and Jio Payments Banks are promoted by corporates. These are the only two payments banks of the 11 that were granted approval that continue to function. Aditya Birla Payments Bank had surrendered its licence in 2019 others including Sun Pharma’s Dilip Shanghvi had dropped their plans earlier.

This would mean that small finance banks would have to come from the NBFC microfinance segment or cooperative banks that choose to convert themselves into small finance banks. Most of the small finance banks operating today were largely converted from microfinance companies or non-banking finance companies engaged in small loans.

Among the non-corporate promoted payments banks, Paytm PB and Fino PB have indicated that they would pursue an SFB licence if the opportunity arises.

RBI’s internal working group on bank ownership had said that small finance banks would be considered for transitioning into a universal bank provided they meet the minimum paid-up capital and net worth requirement applicable to universal banks.

SFBs are considered to have a better business model compared to payments banks as they can lend and issue credit cards. They also do not face any geographic or size restrictions, unlike cooperative banks. However, they do face restrictions in extending large loans to corporate houses.