Bharti Airtel has showed it is serious about pursuing a payments banking licence by forming a joint venture with Kotak Mahindra Bank.
The bank will pick up a 19.9 per cent stake in Bharti Airtel’s wholly owned subsidiary, Airtel M Commerce Services, if the Reserve Bank of India grants the licence.
“The RBI’s vision for differentiated banks represents a significant step in furthering India’s financial inclusion agenda,” said Gopal Vittal, MD and CEO (India and South Asia), Bharti Airtel.
Rival Vodafone, also eyeing a payments bank licence, is expected to announce its strategy in the next few days, said industry sources.
Both Vodafone and Airtel already have mobile payment services under the M-Pesa and Airtel Money brands, respectively, where they offer money-transfer and utility-bill-payment services.
With a payments bank licence, the operators will be able to bring down costs and move into new areas such as merchant payments, which will enable subscribers to use digital money to even buy groceries.
The telecom majors also have the advantage of a vast distribution network. Vodafone India, for example, now has 80,000 banking service agents. That number is expected to cross the 100,000 mark by March.
FDI hurdle Over the next six months Vodafone’s distribution network will become bigger than the total number of bank branches in the country. It is, however, not yet clear how the company will comply with the FDI requirements for a payment banking licence.
While the RBI has set a 74 per cent FDI cap, Vodafone is 100 per cent foreign-owned. According to market experts, the company has an ongoing partnership with ICICI Bank which can be converted into a joint venture, or it could bring in its former Indian investors such as Max Group’s Analjit Singh.
Other telecom operators, such as Telenor, are also expected to throw their hats into the ring for a payments bank licence.
The RBI has set February 2 as the last date for submitting applications.