Reserve Bank of India Governor Raghuram Rajan on Tuesday said he is not ‘overly perturbed’ by surrender of Payments Bank licences by some companies but indicated that there could be a mechanism to ensure that entities apply for licences after due diligence as there is a cost involved in vetting them.
Three entities -- Tech Mahindra, Cholamandalam Investment and Finance Company and a consortium of Dilip Shanghvi, IDFC Bank and Telenor Financial Services -- have decided to back out of the Payments Bank licencing.
"We are not overly perturbed that some people decided after analysis that they would not go forward.
“In fact it suggests that licencing has been adequately liberal and that we have a variety of players coming in," he said at a press conference after announcing the second bi-monthly monetary policy for the current fiscal.
Last August, RBI gave in-principle approval to 11 applicants, including Department of Posts, Aditya Birla Nuvo, Airtel M Commerce Services, Fino PayTech, National Securities Depository, Reliance Industries, Tech Mahindra and Vodafone m-pesa, for setting up payments banks.
Rajan said: "We gave out licences to anybody we thought have the appropriate qualifications to run a Payments Bank.
“We presume that they also analysed potential business prospects.
“After doing further analysis and seeing the other players who are coming in, some of them decided to back off.
"My sense is that the Payment Bank works particularly well for those who have base of operations and many contact points and, therefore, can built upon that and the classic example is somebody affiliated with mobile company with many kiosk through which you can do cash in cash out."
He said however that there is a cost in scrutinising licence applications as lot of information is sought and various government agencies are involved.
"People will decide they will come in or not.
“People should also acknowledge the fact that it imposes some cost on assessors to go through the application.
“We ask a lot of information from various government agencies," he said.
So, going forward, "we have to find some way that people devote adequate time to understanding whether in fact they should apply or not.
“The days where licences were rationed and, therefore, you had to get the licences otherwise you would not get down the line we hope is in the passe", he added.
He cautioned that people should not go in for licences just because it is a valuable property but must have intention of doing the business.
"Don't just go in for licence because it's a valuable property to have but instead do the due diligence on your own.
“And when you apply, it should be with the intent of fully carrying out. . .we not overly perturbed by some people decided to back out," he added.
Image: RBI Governor Raghuram Rajan. Photograph: Danish Siddiqui/File Photo/Reuters