Bharti Airtel, Kotak Bank JV Bags Licence
Cos can now reach out to more clients while driving financial inclusion
New Delhi: Bharti Airtel, India’s largest carrier, has received its payments bank licence that it had applied for in-partnership with Kotak Mahindra Bank, a development that will help companies reach out to more customers while advancing the government’s financial inclusion drive and generate additional revenue.
“Airtel M Commerce Services Limited (AMSL), a subsidiary of Bharti Airtel Limited, has been granted payments bank licence from the Reserve Bank of India on April 11, 2016,” the Sunil Mittal-founded company told BSE on Monday. Airtel, in fact, became the first to receive the formal licence from the bank among the 11 which were granted in-principle approvals in August 2015.
Payments banks can, typically, accept deposits, convey remittances and make payments to recipients, making them ideal for migrant workers who often need to send cash home. They, however, cannot do any lending.
Bharti Airtel and Kotak Mahindra had applied for the licence through its wholly-owned subsidiary AMSL, which launched Airtel Money back in 2011 and was the first mobile-based pre-paid payment instrument service in the country. Kotak had picked up 19.9% stake in Airtel M Commerce, for .₹ 98.4 crore in February.
Telcos such as Bharti Airtel and Vodafone India diversifying into the payments banking business could significantly lower their subscriber churn as those opting for mobile money services are unlikely to leave in a hurry. Besides, the telcos could make extra .₹ 1,200-1,500 crore each in revenue over three years, say analysts. For Kotak, the new payments bank will help it break new grounds among the unbanked and expand its reach in the huge rural market. Kotak’s banking expertise will help Airtel deliver financial services to millions of unbanked citizens across the country.
Airtel has over 245 million customers in India and a revenue market share of 31.4%. AMSL offers mobile money services under the brand name Airtel Money, and the company had proposed to convert the existing pre-paid payment instrument license into a Payments Bank licence.