The Reserve Bank of India (RBI) has proposed setting up of payments bank to further the ambitious financial inclusion plan of the government...
The Reserve Bank of India (RBI) has proposed setting up of payments bank to further the ambitious financial inclusion plan of the government.
However, with limited means to raise revenues, the transactional aspect of the yet-to-be launched payments bank would be the most significant characteristic of the new system, says Kotak Mahindra Bank joint managing director Dipak Gupta. Excerpts:
What is the major attraction of the payments bank model?
The payments bank model provides an opportunity to explore a new product market. As a commercial bank, it is usually not the top priorities to cater to the segment that payments bank is targeting. But, it is a huge market. Normally, it would have taken 3-5 years to look at this segment. The problem, however, is reaching out to this segment. The payments bank would need a product suit that is convenient for the customer to like and adopt.
Which part of the offerings would you focus on — deposits, transactions or sale of financial products?
It is not going to be a savings-account-interest-rate attraction. This segment of customers is not worried about 4% or 6% interest rate. This segment wants to make a transaction. The opportunity for deposits will be limited initially as it is not a part of the mainstream money flow. It is small-ticket segment with huge money flow. It will be a low-margin business. Banks earn in three ways, deposits, lending and fee. The bank is not allowed to lend, and deposits will be difficult because of the cost over-run. It necessarily has to be the fee on transactions.
How do you intend to get the required volumes?
If you look telcos, the top three companies have a customer base of around 15-20 crore people each. If I can get at least 5% as the additional customers, say 75 lakh, that would be roughly 10 times more than my current asset lending customers today. That would not be a big deal in three years. Airtel has about 22 crore customers that go for a top up every third day. So, on an average, 7.5 crore customers conduct a cash transaction every day.
How will you fulfil KYC requirement?
In the beginning, KYC will not be a challenge as it depends on the size of deposits. There will be one segment which will be the low-end segment, typically the R10,000 segment and another segment will be less than R1-lakh segment. The moment Aadhar adoption happens, KYC can take place very fast. The government says 50% of people already has Aadhar card. Also, mobile companies do an elementary level of KYC.
What would be the set-up cost?
You don’t much to set up payments bank. All you need is technology. That would be approximately R10-crore of investment. The most important aspect will be distribution and convenience.