The guidelines for small banks put out by the Reserve Bank of India (RBI) on Thursday attracted positive response from several non-banking financial companies (NBFCs) and microfinance institutions (MFIs) who said they would look at setting up small banks.
The response to the guidelines for payment banks was less enthusiastic with potential players indicating the number and value of transactions would need to be very high for the business to make money. “With lending activity out of the purview of payment banks, the viability of the business would be endangered,” Ashvin Parekh, adviser, Ernst and Young, observed.
However, the concept of allowing telecom companies and banks to form joint ventures for payment banks — which would give telcos access to the customer base of banks — was welcomed.
“It can be a win-win situation,” Sanjay Kapoor, former CEO Bharti Airtel, told FE, pointing out that the biggest challenge would be to make it viable. “Transaction charges would have to be increased from the current level of between 1.5% and 2%,” Kapoor said.