We will not do a joint venture for a payment bank. We are a full bank ourselves and so we don’t need to form an alliance, said Aditya Puri, MD, HDFC Bank.

In the final guidelines released last week, Reserve Bank of India has allowed players to form an alliance with a lender for the formation of a payment bank.

Experts believe that by forming alliances, lenders can reach rural areas as the payment banks will likely tap the unbanked geographies. However, Puri said that HDFC Bank has the network to tap the far flung areas on its own.

Puri is also unfazed at the competition arising from payment banks. “I am not particularly worried about them (payment banks). In fact there is enough for everyone to do. There is space for payment bank, small bank, regional rural banks and even large banks to exist,” he said.

Analysts believe that other large lenders also may not be keen on partnering with PPIs, telcos or other players for niche banks.

An advisor with Indian Banks’ Association said large banks themselves have an extensive branch network to cover under-banked regions. Plus, they would also run the risk of a payment bank (in which it picks up stake) eating into the original business over a period

An executive with a large public sector bank (PSB) said that the coverage of under-banked regions had improved substantially through the Prime Minister’s Jan Dhan Yojana, launched in August and this may be another factor for large banks not to enter the payment bank segment.

Entities interested in applying said mid-sized and smaller banks were more keen to partner for a payment bank. Some mid-sized banks might see benefits in sourcing deposits from uncovered regions through payment banks, a PSB executive said

However, for most payment bank applicants it would be a viable option to apply in collaboration with a lender.

Naveen Surya, managing director of Itzcash, a payment service entity, said they were exploring if they'd like to partner with a bank or not. “For the businesses keen on applying it makes sense to partner with a bank, as it will help the player in Casa (current and savings accounts) addition if you partner with a lender." There are certain other areas such as foreign exchange remittance and treasury where banks will be helpful, he added.

Deepak Haria, senior director, Deloitte India explained that a join venture partnership with banks will definitely be an advantage for players looking to apply for payment banks.

“Players that move with a joint venture will have an advantage as those keen to apply might not have a banking background. Having a lender as a partner can help them in easing out some of the operational issues that a payment bank might have initially,” he added.