Skip to content
Payment Card YearbooksPayment Card Yearbooks
Bharti Airtel applies for banking license

Bharti Airtel applies for banking license

Bharti Airtel, India’s leading telecoms operator, has applied for a banking license, in a potential breakthrough for the country’s under-developed mobile-banking industry.

The first telecoms group to declare its intention to enter formally the banking sector, Airtel

A Bharti Airtel advert for Airtel Money

Bharti Airtel applies for banking license

hopes to upgrade its existing pre-paid payments service, Airtel Money, into what is known in India as a payments bank, which offers remittances and takes deposits but does not provide loans – reports the FT.

“Telecoms companies are logical applicants for this kind of a model,” says Vaibhav Agrawal, vice-president for research and banking at Mumbai based Angel Broking. “A player like Airtel, which has the reach, they would be one of the players who have a shot of making a successful payments bank.”

The company, run by billionaire Sunil Bharti Mittal, now has more than 200m mobile subscribers in India.

If Airtel is awarded a licence, the new business will bring together two of India’s best known business families, with Uday Kotak’s Kotak Mahindra Bank taking a 19.9 per cent stake in the payments bank.

Mobile-payment technologies, such as Vodafone’s M-Pesa, have taken off in other emerging markets from Kenya to Afghanistan, but the sector remains small in India owing to strict regulations.

Expanding mobile banking is, however, a key part of a new push to improve financial inclusion in Asia’s third-largest economy, where just 59 per cent of households use formal banking services, but mobile-phone penetration is also 59 per cent, according to the 2011 census.

Prime Minister Narendra Modi and Raghuram Rajan, the governor of India’s central bank, have put financial inclusion in the spotlight. Since 2013, the central bank has issued the country’s first new banking licences in a decade and opened the sector to telecoms groups.

Operators such as Airtel, with an established customer base in rural India and a good distribution network, are the ideal candidates to set up payments banks, according to analysts at Crisil, the independent credit rating agency. They estimate that telecoms groups will have 15 per cent of the market for domestic remittances within five years.

Payments banks are covered by deposit insurance but they have lower capital requirements than those with full banking licenses, which makes it easier for them to turn a profit. “With an efficient player, if they can garner good volumes, there would be scope to make good money,” Mr Agrawal adds.

The post Bharti Airtel applies for banking license appeared first on Payments Cards & Mobile.

Cart 0

Your cart is currently empty.

Start Shopping