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01DECEMBER2014

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CONSUMER

EPAPER
LIVEMARKETS

FIRSTPUBLISHED:MON,DEC012014.0105AMIST

Payments,smallbankstoringininnovation
Variouscompaniesplantoapplyforlicences.Tieupsandlowcostproductsexpectedtocome
forth
VivinaVishwanathan

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Enteremail

LatestNews
12:06PMIST

SamsungElectronicssaid
tolaunchTizen
smartphoneinIndia
12:03PMIST

ManufacturingPMI:
Wherestheneedfora
ratecut?
11:33AMIST

MarutiSuzukisdomestic
salesjump17%in
November
11:27AMIST

Gemsandjewellery
sharesrallyafterRBI
easesgoldimportrules
11:20AMIST

JetAirways,SpiceJet
sharesjumponhopesof
lowerjetfuelprices

Jayachandran/Mint

TheReserveBankofIndia(RBI)onThursdayreleasedthefinalguidelines
forlicensingofpaymentsandsmallbanks.Thesebanksareintendedto
covertheunbankedandunderbankedareasandincreasebanking
penetrationinthecountry,statedthecircular.Letstakealookatthe
changesthatthesebanksarelikelytobringinfinancialservices.

Editor'spicks

Whatsonoffer?
Accordingtotheguidelines,paymentsbankscanopensmallsavings
accountsandacceptdepositsofuptoRs
1lakhperindividualcustomer,and
.
provideremittanceservices.Thesebanksareallowedtoissueautomated

DRAWBRIDGE

tellermachines(ATM)ordebitcardsbutarenotallowedtoissuecredit
Rajanunderpressurebut
maynotobligegovtwitha
ratecut

cardsorlendinanyform.Paymentsbankscanalsodistributenonrisk
sharingsimplefinancialproductslikemutualfundunitsandinsurance
products,statedthecircular.
Smallfinancebanks,ontheotherhand,willbeallowedtotakedepositsas
wellaslendmoney,thewayothercommercialbanksdo,butthefocuswill
beonsmalllending.Theycanfinancesmallbusinessunits,smalland

WED,NOV262014.05
35PM

WED,NOV192014.04
58PM

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marginalfarmers,microandsmallindustriesandunorganizedsector
SixmonthsofModigovt:
Continuitywithchange

entities.Thesenolongerfacegeographicalrestrictionsonoperations.
Companiesthatarealreadypresentinthepaymentsorfinancespace
suchasprepaidpaymentissuersandnonbankingfinancecompanies
(NBFC)areconsideringapplyingforthenewlicences.Forinstance,
ItzCashCardLtd,FINOPayTechLtd,OxigenServicesIndiaPvt.Ltdand
CitrusPaymentSolutionsPvt.Ltdareplanningtoapplyforpaymentsbank

NGOsinnovatetokeep
Bhopalissuealive

licence.
NBFCssuchasShriramGroup,MuthootFinanceLtdandManappuram
FinanceLtdwanttoenterthebankingspaceandarestudyingthenew
guidelinestotakeadecision.Wereinterestedandourboardmembers
arestudyingthenewdirectivesofRBI.Wewillundertakeadecisionsoon,
saidGeorgeAlexanderMuthoot,managingdirector,MuthootFinance.

Consumptiononlydriver

TheRBIhasalsoallowedmobiletelephonecompanies,supermarket

SLIDESHOW
FRI,NOV282014.0744PM

PhotoEssay:GoGoa,goal

ofgrowth

chains,andothercompaniesandcooperativestosetuppaymentsbanks.
Also,acompanycanformajointventurewithanexistingscheduled
commercialbank.

TributespourinforPhil
Hughesas#PutOutYourBats
ALSOREAD
trends

DYK:Depositandwithdra
somecashdepositmachin
30yearsafterBhopalgas
THU,NOV272014.0946PM

Newformatsexpected
Smallfinancebanksandpaymentsbanksareexpectedtofurtherthe
Amazonhopesforrelief
asKarnatakataxchief
departs

FRI,NOV282014.0420PM

governmentsaimoffinancialinclusion.Withsmallsavingsandremittance
servicestargetedatlowincomehouseholdsandtheunorganizedsector,
thiswillhelpincreasefinancialpenetrationandfinancialsavings,andhelp

tragedy
THU,NOV272014.0250PM

TheexpositionofSt.Francis
Xavier

bringthecurrentlylargelyunorganisedremittancesandpaymentsystems
inIndiaintotheorganisedsector,Nomurastatedinareport.
AccordingtoWorldBankestimates,only35%ofIndiasadultpopulation
hasaccountswithfinancialinstitutions.Thedifferentialbankingwillbeable
toprovidemorepeopleaccesstoformalfinancialproducts.Forinstance,
thepaymentsbankwillhavetogivethestandardinterestrate,ifnotmore,

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LATESTNEWS
SamsungElectronicssaidtolaunch
TizensmartphoneinIndia

ondeposits,saidVishalNarnolia,bankinganalystatSMCGlobal

ManufacturingPMI:Wheresthe
needforaratecut?

SecuritiesLtd.
Willpaymentsbanksbeabletolaunchlowcostandinnovativeproducts?
Theywillbeabletogeneraterevenuebroadlyin3waysinterestfrom
depositonSLR(statutoryliquidityratio),feefromdistributingthirdparty
productssuchasmutualfundsorinsurance,andfromtransactionfeeson
anypayments.Thisabilitytoearnincomeshouldpushthecompaniesto
providelowcostproductstotheendconsumers,saidNarnolia.
Innovation,however,willbethekeytotheirsuccess.Withthelaunchof

MarutiSuzukisdomesticsalesjump
17%inNovember
Gemsandjewellerysharesrallyafter
RBIeasesgoldimportrules
JetAirways,SpiceJetsharesjumpon
hopesoflowerjetfuelprices

thesenichebanks,theonesizefitsallapproachwillcometoanendin
banking.Oncethesmallfinancebanksarelaunched,youwillseesimple
andbasicproductsthatworkfortheloweststrataoftheincomepyramid.
ThecommunitylendingapproachofNBFCswillbeextendedinabanking
setup,saidG.S.Sundararajan,groupdirector,ShriramGroup.
Competitioninthisspacewillworkinfavorofconsumers.Competitionto
getandretaincustomersinfinancialservicesbusinesswillgoup.Hence,
therewillbefocusontechnologytoprovideinnovativeproducts,said
PramodSaxena,founder,chairmanandmanagingdirector,Oxigen
Services.Thecompanyisplanningtoapplyforapaymentsbanklicence.
JitendraGupta,founderandchiefexecutiveofficer,CitrusPayment
Solutions,agreesthattherewillbeinnovation.Theexistingcommercial
banksarenotdoingjusticeintermsoftechnologyinthepaymentspace.
Withdedicatedpaymentsbanks,therewillbesignificantchangeinthe
paymentspace.Ifwehaveabankinglicence,wedonthavetodependon
anotherbankssettlementcycleforourcustomers.Also,wewillhave
accesstothefullATMnetwork,saidGupta.
Jointventureslikely
Whilemorebankswithinnovativeservicesandproductsisgoodnews,
thesemaynotbeindirectcompetitionwiththeexistingcommercialbanks.
AKotakInstitutionalEquitiesreportstated:...thesebanksmaynotemerge
asaseriousthreattothebankingsectorinthemediumtermasthey
continuetoworkinaverytightregulatoryenvironment.Privatebanksmay
looktoactaspromotersofpaymentsbanksratherthancompetitorsgiven
restrictionsoncredit.However,wewouldneedtowatchdevelopmentsin
smallfinancebanks.MostprivatebanksusetheservicesofNBFCstomeet
prioritysectorlending(PSL)requirements.AnyconversionofalargeNBFC
canimpactthemeetingoftheir(privatebanks)PSLrequirements.
Interestedpartieshavetosubmittheirapplicationsforlicencesby16
January2015.Oncethelicencesaregiven,companieshaveagestation
periodof18months.Whiletheguidelinesareout,itwilltakesometimefor
thedusttosettle,andforprospectiveparticipantstodecideifbeinga
paymentsbankorasmallfinancebankmakessense.Alsoitistooearlyto
sayhowaccessibletheirserviceswillbe.Hopefully,thesenewformatswill
beabletoworkinletterandspirit.

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