Voda may Surrender Bank Licence
Mumbai: One of the casualties of the Idea Cellular-Vodafone India merger could be a payments bank. The merged entity could lead to Vodafone surrendering its payments bank’s in-principle approval as it cannot compete with another group company Aditya Birla Nuvo which also has a similar approval from the Reserve Bank of India.
Industry insiders said that since Aditya Birla Nuvo, which owns Idea Cellular, also has a banking licence, Vodafone would give up its right after the merger.
“The major reason for Vo- dafone to surrender would be its foreign ownership. Vodafone India is a whollyowned subsidiary of its UK parent and to be able to set up a payments bank, it needs to reduce it to less than 50%, for which they have not announced any domestic partner yet,” said one person in know of the matter.
A Vodafone India spokesperson, however, said that though they were in talks with the Aditya Birla Group for an all share merger, they were on track to fulfill their ambition regarding a payments bank. The two companies, however, have not decided on the brand name and the final terms and conditions. But once they get a common network, there’s no reason for the merged entity to have two licences, said industry observers.
“As of now, the final decision on the merger has not been taken, but the thinking in Vodafone is to give up on the licence and undertake banking operations under the Aditya Birla Nuvo licence, as they do not have similar problems of foreign shareholding,” said another person familiar with the matter.
Further, Idea Payments Bank is planning to start banking operations in the first half of this year.
RBI had announced a list of 11 entities which were given in-principle nod to set up banking operations within 18 months from August 19, 2015. Of the 11, while Cholamandalam Distribution Services, Tech Mahindra and Dilip Shanghvi have already given up their licences, others such as Paytm, Airtel Payments Bank, Fino Paytech, India Post and NSDL have already applied for final clearance to start operations. The RBI had granted licences to differentiated banks in 2015 to drive financial inclusion specifically in places where banks have not been able to set up infrastructure. All major telecom companies were granted licences as they connect more than a billion mobile phones and could offer basic banking services to unbanked Indians.