Sun Pharma, Telenor and IDFC Bank drop payments bank plan

Sun Pharma founder Dilip Shanghvi on Friday said he has dropped plans to set up a payments bank jointly with IDFC Bank and an arm of Norwegian telecom group Telenor, becoming the second to abandon the idea after Cholamandalam pulled out a few months ago.

"This decision, collectively made by the three partners, will be communicated to Reserve Bank of India. Consequently, the payment bank license will not be pursued," the three partners said in a joint statement, but did not disclose the reason.

Dilip Shanghvi Family and Associates, was among 11 firms that were awarded licences last August to set up niche "payments banks" aimed at granting millions of Indians access to basic banking.

Cholamandalam group, another group that had secured licence to set up payments bank had pulled out of the couple a couple of months back.

Last year, Shanghvi, the lead applicant, with Telenor Financial Services and IDFC Bank as partners, was granted in-principle license by RBI to form a payments bank – a differentiated bank that merely undertakes acceptance of demand deposits, remittance services and other specified services and no lending.

The joint statement noted that representatives of the three partners have worked together to establish relevant frameworks and a governance structure for the proposed joint venture (JV) over the past eight months.

"The intention of the JV was to combine our expertise to launch a robust payment bank service in India. Following the mutual decision to withdraw these plans, the payment bank licence will not be pursued," Shanghvi said.

"It was a good experience working with Telenor Financial Services and Dilip Shanghvi over the last year. We thank them for their support and look forward to future associations," said Rajiv Lall, founder MD & CEO of IDFC Bank said.

Telenor Financial Services senior VP and head Tine Wollebekk said, "From the day we signed the Letter of Intent, we have worked hard together with our partners to form a company which can meet the demand for basic banking services across India."

In contrast, Aditya Birla Nuvo Ltd (ABNL) said on Friday it plans to commence payments bank services by the end of the financial year.

The other entities that were given in-principle approval, which include Airtel M Commerce Services Ltd, Vodafone m-pesa Ltd, Department of Posts, Reliance Industries Ltd and Tech Mahindra Ltd are still in the race.

RBI had, in August last year, granted ''in-principle'' licence to eleven entities for setting up payments banks and had also proposed such licences ''on tap'' in future.

The in-principle approval is valid for a period of 18 months, during which time the applicants have to comply with the requirements under the guidelines and fulfil the other conditions as may be stipulated by Reserve Bank.