AB Nuvo sets up Payments bank JV with Idea Cellular

Idea Cellular in a stock exchange filing on Monday informed about formation of a joint venture with group firm Aditya Birla Nuvo to set up Payment Bank with the name Aditya Birla Idea Payments Bank Limited.

RBI has granted in-principle approval to set-up payments banks in a joint venture arrangement with Aditya Birla Nuvo. As a promoter, ABNL (51 per cent) jointly with Idea (49 per cent) will setup the payment bank. Payment bank differs from conventional banks as they are expected to reach customers mainly through their mobile phones rather than traditional bank branches. The "in-principle" approvals granted last year are valid for a period of 18 months, with promoters expected to own 51 per cent of the stake in the new bank.

The JV partners are speeding up the launch of Payment Bank by second half of calendar year 2016 and intends to ride on the strength of Idea’s 2 Million+ retail distribution channel across 375000 towns & villages and ABNL’s experience of successfully promoting and scaling up a number of consumer centric businesses. This yet to be seen when the company would start with operations and how will it affects the revenues in the future.

Payments banks are allowed to collect deposits (initially up to Rs 1 lakh per individual), offer internet banking, ease money transfers, and sell insurance and mutual funds.

A total of 11 entities, including Reliance Industries, Airtel M Commerce Services, Vodafone m-pesa, Tech Mahindra, and Department of Posts, were given in-principle approval by the central bank to set up payments banks.

In a recent development, mobile wallet major Paytm appointed Shinjini Kumar, a former RBI executive and currently director at management consultancy firm PricewaterhouseCoopers (PwC), as CEO of its payments bank.

Reacting to the news shares of ABNL gained 2 per cent at Rs 756.95 and Idea Cellular’s scrip was trading with the gains of 1.85 per cent at Rs 110.40 on NSE.