Banking boon for Alibaba-backed Paytm in India

MUMBAI: Indian digital-payments provider Paytm intends to launch its banking operations within two months, a move that would bolster its push to sign up more than a third of India’s 1.3 billion people as customers, according to its chief financial officer.

The roll-out of its so-called payments bank by March will help the firm backed by Alibaba Group Holding Ltd reach 200 million customers within a year, CFO Madhur Deora said in a phone interview earlier this month. The company is seeking as many as 500 million in the medium term, he said, without being more specific.

“We are adequately capitalised as of now and the focus is on executing our plans,” said Deora, 38, who joined Paytm in August. He had previously worked with Citigroup Inc for more than 17 years.

The payments-bank concept was introduced in India as part of a broader government push to give more citizens in the world’s second-most populous nation access to financial services. In August 2015, the Reserve Bank of India gave approval to 11 applicants including Paytm and companies controlled by billionaires Sunil Bharti Mittal and Mukesh Ambani to set up these banks, which are allowed to take deposits and pay interest on the money, but not lend it out.

In this way, the payments bank will bolster Paytm’s digital-wallet services by providing account holders with returns on their deposits and with financial products like mutual funds and insurance policies, Deora said. The company will be moving its digital-wallet accounts into the payments bank, he said.

Payments banks need to have a capital buffer of at least 15% of assets and will need RBI approval during their first five years in operation to open branches, guidelines issued by the central bank show. Regular commercial banks are required to hold capital buffers of 9%.

The launch of the payments bank offers another boost to a firm that saw usage of its platform soar after Prime Minister Narendra Modi’s November decision to ban high-value currency notes. Within hours of Modi’s announcement, Paytm saw a 1,000% surge in money added to customers’ digital wallets, the company said the day after the ban. – Bloomberg