The banks will operate with point-of-sales devices and through business correspondents. They have the potential to revolutionise retail banking in the payments space. They will boost the number of cashless transactions. Besides, the banks will also be instrumental in encouraging the habit of savings.
RBI chose large companies and telecom operators for this venture. It said that organisations which have experience are picked from varied fields. These organisations have different capabilities that may result in different models.The approval from RBI will be valid for one and a half year. If the organisations abide by RBI rules, they may receive formal licenses after this period.41 organisations had applied for payments banks. Out of these 11 were chosen. These include Reliance Industries Ltd., Airtel M Commerce Services Ltd. (subsidiary of Bharti Airtel), Department of Posts,Tech Mahindra Ltd., Aditya Birla Nuvo Ltd.,Cholamandalam Distribution Services Ltd.,FINO PayTech Ltd., National Securities Depository Ltd. (NSDL), and Vodafone m-pesa Ltd.(a part of Vodafone India).
The list also consists of 2 individuals - Dilip Shanghvi and Vijay Sharma. Shanghvi is the Founder of Sun Pharmaceutical Industries Ltd. and Sharma is the CEO of One97 Communications.
Reliance Industries is partnering with State Bank of India (SBI) to form the payments bank. SBI has asked for 30 per cent stakes in the partnership. Chairperson of SBI, Arundhati Bhattacharya expressed that the strengths of two India's Fortune 500 companies will be combined through this partnership. The companies are "committed to making a transformative impact on India's financial inclusion landscape." She further said that the license is an opportunity for them to encourage financial inclusion and offer banking services to under- banked, unbanked and small businesses.
Union Finance Minister, Arun Jaitley has said that payment banks licenses given by RBI is a vital step. These banks will reach to people in rural areas, too.