Mumbai: Dilip Shanghvi, promoter of Sun Pharmaceutical Industries Ltd, said on Friday said that he was withdrawing his plan to launch a payments bank.
Shanghvi, who was given in-principle approval by the Reserve Bank of India (RBI) to start a payments bank in his personal capacity, had announced a tie-up with Telenor Financial Services and IDFC Bank Ltd to pursue the venture.
“Telenor Financial Services, IDFC Bank and Dilip Shanghvi today jointly announced withdrawal of the on-going efforts to form a Payments Bank venture in India. This decision, collectively made by the three partners, will be communicated to Reserve Bank of India (RBI). Consequently, the payment bank license will not be pursued,” said a statement issued by the three partners.
Shanghvi is the second to give up on plans to launch a payments bank. In March, Cholamandalam Investment and Finance Co. said it would not pursue a payments banking venture even though it had received in-principle approval from RBI last year.
The regulator had allowed 11 entities and individuals to open payment banks, subject to final approvals. This list is now down to nine.
The new category of banks, which some experts said could prove to be disruptive, will provide basic savings, deposit, payment and remittance services to people without access to the formal banking system.
The payments banks will target financially excluded customers such as migrant workers, low-income households and tiny businesses. They will not be in the business of lending, so they will be shielded from the risks that conventional banks are exposed to.
“Telenor Financial Services and IDFC Bank have rich experience from offering financial services and the intention of the JV was to combine our expertise to launch a robust payment bank service in India. Following the mutual decision to withdraw these plans, the payment bank license will not be pursued”, Shanghvi said on behalf of Dilip Shanghvi Family & Associates in the statement.
Shanghvi, Telenor and IDFC Bank did not specify a reason for the decision to withdraw their application. Payments banks may find it tough to become profitable in the initial stages, experts say.
Aditya Birla Nuvo Ltd; Airtel M Commerce Services Ltd, a part of India’s largest phone company Bharti Airtel Ltd; department of posts; FINO PayTech Ltd; National Securities Depository Ltd; Reliance Industries Ltd; Tech Mahindra Ltd; and Vodafone m-pesa Ltd, a unit of telco Vodafone India Ltd, were the eight organizations that are still looking to start payment banks.
Vijay Shekhar Sharma, CEO of One97 Communications Ltd that runs Paytm, the mobile commerce and payment company, also has in-principle approval and is looking to launch a payments bank by August. Airtel Payments Bank will start services in the second quarter of the current fiscal year, parent Bharti Airtel said in a statement on 3 May.