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NPCI to extend shareholding to 49 more banks



Updated On - Monday, 26 August 2013

MUMBAI 18 August 2013

The National Payments Corporation of India (NPCI) is planning to broad base its shareholding by inducting 49 banks as shareholders.

The capital (about Rs 100 crore) contributed by the banks towards shareholding will help NPCI to further strengthen the retail payments infrastructure and bring down transaction costs in the banking system.

Currently, NPCI has ten core promoter banks — State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC.

A.P. Hota, Managing Director and CEO, said: “Recently, we appointed PwC as our consultant to examine how to meet the aspirations of a large number of banks to be part of the NPCI ownership and how to have a broader representation of the board of directors.”

Given that NPCI is a not-for-profit company, the 10 promoter banks, who each contributed Rs 10 crore to its paid-up capital, do not get any dividend. Hence, the existing shareholders are agreeable to broad base NPCI’s shareholding.

“Many complex issues are involved in the (fresh) capital raising exercise. The initial capital raising was not a problem.

“But now when we offer shares, it has to be based on a fair value method. They (new shareholders) cannot come at par. They will have to pay a little premium,” said the NPCI chief.

NPCI will have to do a valuation exercise, keeping in view the fact that if the valuation is very competitive/aggressive, banks will not show interest in picking up a stake.

“So, it will be a very conservative valuation. We will unlock the value of NPCI in a gradual manner,” said Hota.
NPCI has drawn up two criteria based on which it will induct 49 banks (including a notional representation from the co-operative sector) as shareholders. It is planning to rope in all the banks with business size (deposits plus advances) of Rs 1-lakh crore and above.

Hota said there are only about 35 banks which are having a business of more than Rs 1-lakh crore. Of these 35 banks, 10 are already members, so 25 banks remain.

Further, in the tier-II category (less than Rs 1-lakh crore business category), NPCI will induct shareholders on the basis of the volume of transactions (payment) they give to the Corporation.

Subsequently, NPCI will dilute (after the first tranche of dilution). The idea is not to restrict anybody. The Corporation is an umbrella institution for all the retail payment systems in the country.

Hota observed that since NPCI is a payments utility of the entire banking industry, a need was felt for broader representation on the board, other than the 10 promoter-banks.

Published by: The Hindu Business Line

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