On Thursday, the Reserve Bank of India (RBI) released a list of eight entities/promoters who wish to apply for universal commercial bank and small finance bank licenses. The top contenders include Sachin Bansal’s Chaitanya India Fin Credit, forex major UAE Exchange and Dvara’s micro-finance arm.
Recently, the central bank appointed an expert committee to evaluate applicants for bank licenses. This committee will evaluate fresh applicants who wish to apply for ‘on tap’ bank licenses over the next three years, in addition to non-bank lenders and payments bank that wish to convert to an SFB or universal bank. In 2014, the RBI gave universal banking licenses to Bandhan Bank, a micro-finance lender, and IDFC Bank, a development finance company. IDFC Bank was merged with Capital First and is now called IDFC First Bank.
Since payments banks are restricted from lending and can only provide deposit services, restricted up to ₹2 lakh per customer, they rely on investing the funds in government debt securities or certificate of deposits and cross-selling other financial services like payments, insurance and investments for revenue. Payments banks need not place an application for an ‘on tap’ license, since they are allowed to convert to an SFB after five years of satisfactory operations and fulfilling the capital requirements, per the RBI’s Guidelines.
Some of the leading payments bank like Paytm, Airtel, IndiaPost, Jio and Fino can convert to an SFB over the course of the next three years and begin lending on their own-balance sheet, thereby, generating interest income.
Universal Bank applicants
- Chaitanya India Fin Credit Private Ltd:
In 2019, Sachin Bansal’s Navi Technologies acquired two financial entities called Chaitanya Rural Intermediation Development Services (now called Navi Finserv) and Chaitainya India Fin Credit, a 10-year old micro-finance lender. Navi Finserv applied for a universal bank license in January 2020 and is the parent entity of Chaintanya. The micro-lender operates in 7 states and has over 5 lakh customers. As of December 2020, it had Rs 1,388.71 crore in assets under management.Bansal, who founded Flipkart with his brother, wants to streamline access to credit and banking services through purely digital means. Last year, Navi Finserv launched a personal loan app.
- UAE Exchange and Financial services:
Back in 2013 and 2017, UAE Exchange made a bid for a universal bank license from the RBI. However, despite being a regulated forex player and authorised dealer, these applications were unsuccesful. Now the company has thrown its hat in the ring again, after re-branding as Unimoni Financial Services.
- The Repatriates Cooperative Finance and Development Bank Limited (REPCO Bank)
At present, REPCO Bank is a multi-state cooperative bank that is over 50 years old. The bank operates predominantly in the South of India as it was set up for the purpose of rehabilitating repatriates from Sri Lanka and Myanmar, among others.
- Pankaj Vaish
Vaish is a former banker with Citi operating across various departments like trading, derivatives, commodities and forex. He is a graduate in Economics and Finance from the Massachusetts Institute of Technology and also headed the equities division at Nomura Securities. Currently, he is the chief investment officer at PV Capital Management LLC, a hedge fund in New York.
Small Finance Banks applicants
- Dvara Kshetriya Gramin Financial Services Private Limited
In 2008, the Dvara Trust incorporated Dvara KGFS as a financial services player serving unbanked segments of the country. While the trust focusees on research and policy-making, Dvara KGFS rovides micro-loans, savings products, personal loans, business loans and cross-sells insurance and mutual funds. The company says it has a “wealth management” approach when it comes to designing products for this segment of the population. They operate as business correspondents for banks and non-bank lenders who provide the loans.Both the trust and KGFS are headed by Bindu Ananth, a former ICICI Banker.
- VSoft Technologies Private Limited
VSoft was founded in 1996 in the United States and operates in 7 countries, including India. The company is a software-as-a-service for the banking and payments industry, providing various tools and software for core banking, lending and payments IT infrastructure.
- Calicut City Service Co-operative Bank Limited
Founded in 2002, Calicut City Service Coop Bank operates mainly in the city of Calicut in Kerala.
- Akhil Kumar Gupta
It is believed that Gupta, the Co-Vice Chairman of Bharti Enterprises Ltd, has applied for an SFB license. MediaNama could not independently verify this information.
- Will 2021 be the breakout year for neo-banks?
- The unintended consequence of RBI’s new card rules
- Lending fintechs warrant novel regulation methods to address risks, says RBI governor Shaktikanta Das