Telecoms and banks to tie up in Indian payment bank partnerships

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The Reserve Bank of India’s financial inclusion project could see banks and telecom companies teaming up as joint stakeholders in new Indian financial institutions.

Banks such as Axis Bank, Ratnakar Bank, ICICI Bank, IDBI Bank, State Bank of India and Kotak Mahindra Bank may be considering buying into companies that win a licence from RBI to set up payment banks. On Thursday, RBI extended the January 16th deadline for applications for small and payment bank licenses to February 2nd, The Economic Times reported.

RBI is supporting the creation of payment banks as part of a financial inclusion project that will expand the reach of the country’s financial services. Payment banks will offer limited services such as money transfers, loans and deposit collection in rural areas of India, where telecom networks could be an advantage. Mobile wallet companies such as Paytm, Oxigen and ItzCash could also be interested in a tie-up.

“If banks compete with payments banks, their business model will not be viable,” Ashvin Parekh, managing partner of Ashvin Parekh Advisory Services, told The Economic Times. “Banks entering into tie-ups with payments banks or becoming equity partners in such ventures will help them expand their reach. Payments banks through such tie-ups will get a readymade customer base.”

Bharti Airtel is rumoured to be involved in talks over an equity partnership in a payments bank with a private sector lender, the ET report added, building on Airtel’s experience in African markets such as Kenya.

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