A penalty to surrender payments bank licence?

The case seems to be getting more interesting. What should be treated as a normal entry and exit in business decisions is getting lost in licences and penalties. After the two payment banks surrendered their licences, the licencor is not amused.


Reserve Bank of India (RBI) Deputy Governor S S Mundra on Monday expressed his displeasure at applicants surrendering their payments bank licences and hinted at hefty penalty for firms who indulge in such practices.

Two months after Cholamandalam dropped its plans for floating a payments bank, Dilip Shanghvi of Sun Pharma, IDFC Bank and Telenor Financial Services last week said they were not interested in establishing the niche bank either, without giving any reason. “Yes, we would certainly feel a little aggrieved because a lot of efforts from the part of the RBI goes in processing these applications. So, having done that, if they don’t materialise, that’s the only point (of disappointment),” Mundra said at the sidelines of an event by Banking Codes and Standards Board of India.  However, surrendering licences is not a crime and the current regulations do not enable the central bank to charge a penalty, he said.  

“Currently, we don’t have a scope of charging a serious processing fee, which can be forfeited if this kind of exercise is done,” Mundra said, adding, in jest: “But if we learn by experience, probably we can do something, which can help augment our revenue substantially.”

It took RBI more than a year to finalise on the 11 names, which are fit to operate payments banks.

One year was lost which could have been crucial in deciding the entry/exit factors.

I don’t know but the licencor could have followed a different approach to these entities. Few of these payment banks were already into payment related services and an elaborate mechanism to licence etc should not have been there. These are niche services which could have been allowed to evolve more freely as they did actually before becoming licenced entities. They could be treated like NBFCs which could decide whether to fund their operations via equity or equity & deposits. Only in case they opt for deposits, banking regulations and related formalities should have applied. With quite a few big banks behind these licenced banks as partners in most likelihood they shall be absorbed by the big bank over a period of time.

But then a simpler process would have not hyped things which somehow seems to be one of the major purposes behind banking policy in India.


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