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Vodafone M-Pesa allows loan EMI payments; primer for payments bank?

Vodafone’s M-Pesa wallet will now allow customers to pay monthly EMIs for loans. Currently, it has partnered with a number of non-banking finance companies (NBFCs) which includes Bajaj Finserv, Home Credit Finance, Mannapuram Gold, Muthoot Fincorp and Ess Kay Fincorp. Customers can make EMI payments through the Vodafone M-Pesa app or they can visit the closest M-Pesa business correspondent. The company claims that it has a business correspondent network of 1.3 lakh agents right now.

Note that Vodafone also has an in-principle approval from the Reserve Bank of India (RBI) to start a payments bank and the deals with the NBFCs seem to be a primer for launching its operations. Remember, payments banks are not allowed to give loans to customers from their own books, but they are allowed to offer loans from other financial institutions to customers.

In this scenario, the EMI payment facility from Vodafone will be crucial to these NBFCs in the collection of loans.

Idea Cellular merger

Earlier this month, Idea Cellular, which is in merger talks with Vodafone, got the final licence from the RBI to start a payments bank. Out of the eight entities which got the in-principle nod to start a payments bank, Vodafone is still last entity which has not received the final approval.

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However, Vodafone may have to surrender its approval if it merges with Idea Cellular, as indicated by this Economic Times report. It added that Vodafone would have to surrender the licence as it may not be able to comply with foreign ownership norms. Vodafone India is a wholly-owned subsidiary of its UK parent and payments banks need foreign shareholding to be below 50%.  The publication added that Vodafone was in talks with the Aditya Birla Group for an all-share merger, they were on track to fulfill their ambition regarding a payments bank.

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