Telecom bank cometh? Idea, Vodafone, Airtel draw up plans to launch payment banks

After the RBI’s offer for telecom companies to open payment banks, three major Indian telecom companies are reportedly preparing a business plan to open payment banks and could even apply for licences.

CNBC-TV18 quoted unnamed sources as saying that Idea, Vodafone and Airtel have prepared a business plan for and even planned to apply for licenses to open payment banks.

The three telecom companies are reportedly going to submit a set of queries to the central bank seeking clarity from the RBI on the guidelines to open a payment bank and on having standalone retail partners as agents.

Earlier this week Kishore Biyani, CEO of Future Group, had also expressed his interest in setting up a payment bank.

“We already have a large customer base as well as the technology in place to implement a payment bank. Our pre-paid card mechanism can work well on a pan-India basis,” Biyani said.

A spokesperson for Idea has confirmed that they are preparing a business plan for a payment bank and are awaiting clarity on guidelines for it. Airtel and Vodafone did not comment on their plans.

Firstbiz editor R Jagannathan ,while welcoming the RBI’s decision to allow more payment banks to be set up, had pointed out that every telecom company that now needs a bank interface to facilitate small payments can, conceivably, set up its own payment bank.

Given that telecom companies like Airtel and Vodafone rival the biggest national bank State Bank of India when it comes to customers, the telecom companies could easily serve as many customers as the bank when it comes to basic deposits.

The telecom company owned payment banks could attract a substantial chunk of the dormant savings account balances from traditional banks and would need just a presence on the internet to begin operations.

Since they would be able to invest in government bonds, telecom companies would also be able to offer up to 7 percent on deposits which would attract idle money sitting in savings bank accounts where they earn just 4 percent interest. While the final call rests with the RBI, the new small banks could change banking in India for the better.