Vodafone likely to surrender payments bank license if merger with Idea materializes

Vodafone India could surrender its in-principle approval from the Reserve Bank of India for setting up a payments bank due to its ongoing talks with Idea Cellular for an all-share merger.

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According to the Economic Times, Vodafone, India’s second largest telecom operator cannot compete with Idea Cellular’s sister company Aditya Birla Nuvo which also has a similar approval from the RBI.

“The major reason for Vodafone to surrender would be its foreign ownership. Vodafone India is a wholly owned 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,” a source was quoted as saying by the publication.

Another person said that Aditya Birla Nuvo doesn’t have similar problems of foreign shareholding, thereby it will be in a position to set up a payments bank.

A Vodafone India spokesperson, however, said that the telco is on track to fulfill their ambition regarding a payments bank. Vodafone India’s managing director earlier told media that the telco launch its payments bank within three months.

“Our plan is on track for launch by March,” he earlier said, adding that the telco hasn’t applied for the final license yet.

Idea Payments Bank, on the other hand, is looking to start payments bank operations in the first half of this year.
In August last year, RBI gave the in-principle license for opening a payments bank to 11 entities; of these, three have decided not to proceed, on profitability concerns. So far, only Airtel and India Post Payments Bank have launched their payments bank.

Also read: Vodafone, Airtel get nod for payment banks from RBI

Airtel Payments Bank, India’s first payments bank, has enabled over 200 villages across India to go cashless as part of its endeavor to take its banking services deep into rural/unbanked areas and contribute to financial inclusion in the country

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