Will You Start ANGADIA Business With Rs.100Crs. Capital? (Untold Secret of about PAYMENT BANKS)

Friday, August 21, 15

Will You Start ANGADIA Business With Rs.100Crs. Capital? (Untold Secret of about PAYMENT BANKS)

Greetings from Hitesh! Thanks for appreciating my last article on investment strategy. It has become the most read one after our article on Digital Insurance Policy. I appreciate your time. Market was celebrating approval of Payment Bank License to 11 out of 41 applicant. Let me deal with the Payment Bank.

What is Payment Bank?

A payments bank is a type of non-full service niche bank in India. A bank licensed as a payments bank can only receive deposits and provide remittances. It cannot carry out lending activities. This type of bank was created to help India reach its financial inclusion targets. This type of bank is targeted at migrant labourers, low income households, small businesses, and other unorganised sector entities.

In my DESHI language they are typically ANGADIA SERVICE Provider with a MODERN NAME of PAYMENT BANKS.

So what exactly is a payment bank, and why is it important?

Payment banks can accept deposits restricted to Rs. 1 lakh per customer, and are allowed to pay customers interest on the money that is being deposited. They can be used for either current accounts or savings accounts. For companies that have operated as mobile wallets (which are a type of Pre-Paid Instrument aka PPI), this is a big step forward as it raises the funds limit, and allows interest to be paid on the deposits, making it more attractive for users to store their money with a Paytm or m-Pesa.

Unlike a regular bank however, a payment bank can't loan money to people, or issue credit cards. Also, the payment banks are only allowed to invest the money customers deposit into government securities.

While the payment banks can't issue credit cards, they can issue ATM and debit cards. Since many of the 11 new license holders already operate mobile wallets, the ability to issue an ATM card helps close the loop and makes it easier to convert virtual money into cash, and vice versa.

What Do I understand from all of the above?

1.   I need to invest Rs.100 crs in capital to get the license.

2.   I can accept the money only as a deposit and I have to pay the interest on the same.

3.   Fixed deposits (upto Rs.1 lakh) will have to be invested in Government Securities only.

4.   I can’t lend any money to anybody out of this Kitty – in principle.

5.   I will be charging a small fee to remit money – the way WESTERN UNION or our local ANGADIAS are charging.

6.   This can be used by GOVT to transfer their subsidies to the last consumers.

What I don’t understand?

Looking at the above conditions – I do not see a potential to make money in this business – accept remittance fees. The attraction could have been to use this FD money by the company for their projects. However, this is not possible as the money is to be invested in Govt. securities only.

Local ANGADIA charges Rs.200 to Rs.300 per Rs.1 lakh of TRANSFER. It is as low as Rs. 50 to Rs.100 for a REGULAR and BIG CLIENTS. They have an investment of Rs.5000 in rent per month for a small office and two telephone and two persons at the most. It is fast and it is done on the PHONE. You get instant transfer without KYC!! Can these banks compete with these guys?

Existing Normal banks are also providing lot of money transfer services like CHILLAR by HDFC bank. They are FREE at present. Why you need another banks for the same!!

There are so many remittance services are available at a fraction of cost – so the new guys can’t charge much money and also they will compete with each other for a business so the margin will be WAFER THIN. How they will afford the high salary of MBAs and INFRASTRUCTURE in this MARGIN?

What is UNTOLD SECRET?

I am observing Mr.Modi and his policy initiatives without any judgment. Let me explain his game plan.

·      He advocated and requested world investors to invest in online ventures like FLIPKART and SNAPEDEAL, though they are lose making. This has changed he shopping habits of the Young Indians. They are shopping from the Mobile Applications. All their shopping is monitored and TAX paid!! He stopped the loophole of Local traders evading the TAX to an extent. When this generation grows old – they will get used to this and the next one will also follow Online Model of shopping!! So, NO TAX CHORI.

·      He is advocating AADHAR number and direct subsidy transfer to the bank account – no middlemen and money directly reaching to you.

·      ANGADIA services are running without any monitoring and it’s not possible to know the volume at any given point of time. With Payment bank he plans to bring this money transfer also into legal control.

All his so-called small steps have very long lasting and far-reaching effects on the India of tomorrow. I can say that India will not be the same tomorrow, as long as his vision is followed with proper mindsets.

They say you change the HABITS and you change the MAN the way you want. He is changing the HABITS of Young. So, he will be changing India in coming years. Then only we may see ACCHE DIN!!

How come So MANY BIG Guys AFTER it?

There were 41 guys and only 11 got In-principle approval to start the bank. I am unable to understand their apparent business logic for getting into this business looking at the business limitations kept by RBI.

How this can be used in a NEGATIVE WAY?

This system can be used to keep black money in a most sophisticated way. This is how it can work. This is for a small guy and small amount upto Rs.1 lakh only. Say a guy wants to keep his Rs.1 lakh cr of black money safely. All he needs to do is to keep Rs.1 lakh deposit each on 1 Cr peoples name!! We are a country of 125 crs to get 1 cr people is not difficult!!

By conditions payment banks are supposed to keep 25% branches in RURAL areas. They will deal with the CASH only. So, open branches in rural areas – open accounts and keep the cash safely.

However, I am sure RBI would also know about this possibility and it would have taken steps to stop this loophole also.

What Next?

When a CHANGE DO NOT LOOK LIKE A CHANGE – it is the best way to change the mass. I am happy that Mr.Modi is able to do it successfully at INDIA level also!!

Disclaimer:-This ARTICLE is written for EDUCATION PURPOSE based on the available details as on TODAY. With more details coming in the times to come – our views will also change!!

Wish you all a FANTASTIC FRIDAY.

Follow me on Twitter @hiteshmparikh and join me on WhatsApp on +91 986 942 5399.

Live With Passion…. Invest With Passion.

Hitesh Parikh