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Telco’s Shouldn’t Start Banking Co’s In India – Planning Commission

This is strange, coming as it is, after a few major telecom operators have already inked partnerships with banks: PTI reports that the Planning Commission of India is not in favor of telecom operators being allowed to set up banking companies, and becoming financial institutions. Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission wants banks to do manage transactions.

His statement is unexpected, given that his comes on the back of a few of the major telecom operators forming tie-ups with banks – Bharti Airtel with State Bank of India, Idea Cellular with Axis Bank and Vodafone Essar with ICICI Bank, signing up as banking correspondents, rather than becoming banks themselves.

Of the incumbent private telecom operators, Tata Teleservices, Reliance Communications and Aircel remain. Have any of them applied for a banking license? The other thing to keep in mind, is that the Reserve Bank of India has consistently pushed for banking and transactions to be done through banks.

The only instance we can think of where in there are transactions taking place out of the banking ecosystem, are the cash card services: the RBI has given licenses to 17 companies so far – companies like Itz Cash Card, Done Card, Atom, Beam have been given licenses, as has, interestingly enough, Bharti Airtel. Vodafone also has plans to launch MPesa in India. Some of these services were live and operational, and the RBI, by issuing licenses is bringing these businesses under the ambit of regulation.

There’s little clarity on what Ahluwalia was referring to – whether the prepaid card plans, or plans from telcos to register as banks. if you know, do leave a comment.

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