Bengaluru-based brokerage giant Zerodha is actively seeking a payments bank license from the Reserve Bank of India (RBI). Their ambition is to establish a bank that would manage customer funds and streamline payment flows, enhancing trading efficiency and reducing reliance on external banking systems.
What Happened? According to a report by The Morning Context, Zerodha’s proposal to the RBI involves setting up a bank to specifically cater to the payment needs of its over 6 million active customers. However, the RBI remains hesitant to grant new licenses due to past challenges with the payments bank model.
Launched in 2017, the payments bank experiment hasn’t met expectations, with many entities facing operational struggles, regulatory issues, and low margins. Despite Zerodha’s intent to offer a use-case in line with the RBI’s vision, the central bank’s reluctance reflects its cautious stance towards the payments bank sector.
Zerodha’s push for a banking license comes amid increased competition in the brokerage market and recent technical issues with its trading platform.
Establishing a payments bank could significantly bolster Zerodha’s position in the market by reducing dependence on external banking and payment systems. However, the RBI’s current stance leaves Zerodha’s banking ambitions in a challenging spot, as it navigates regulatory hesitance and the complex landscape of India’s financial sector.