Home / Industry / PPIs can become payments banks: Nachiket Mor

Mumbai: The proposed payments banks, a new set of lenders suggested by a Reserve Bank of India (RBI) committee this week to widen the spread of financial services, can be created by converting prepaid payment issuers (PPIs), Nachiket Mor, chairman of the panel, said on Friday.

India has 27 PPIs. These companies provide cards that customers can use to make payments with the money that’s stored in them.

“This will be a gradual conversion for them,"said Mor, who is a member of RBI’s central board and a former ICICI Bank Ltd executive.

Even other entities that are interested in the business can set up the payments banks, Mor said. Such banks can convert themselves into full-service banks over a period of time, he said.

Similarly, the proposed wholesale banks can come up through the conversion of non-banking finance companies, Mor said.

The process of giving entry to such banks should be decided by RBI, Mor said.

“RBI will have to decide the process. We have not said either way but we would welcome a smooth conversion process," Mor said.

Early this week, the panel headed by Mor submitted a report on improving the financial inclusion process through the creation of dedicated banks and universal electronic bank account numbers for every citizen by January 2016.

Such banks will have a minimum entry capital requirement of 50 crore, one-tenth of what a full-service bank requires, since they will have a near-zero risk of default, the panel said.

The Mor panel recommendations for dedicated banks for financial inclusion has come at a time when the central bank is in the process of giving entry to a third set of private banks in India’s 81 trillion banking sector.

An expert panel under former RBI governor Bimal Jalan is currently evaluating the credentials of 25 aspirants, including the Aditya Birla Group, the Bajaj Group and Anil Ambani’s Reliance Group.

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