ClickCease

Payment Banks Case Study 1: Why They Got Licenses + Expectations

Prove
January 28, 2021

Cholamandalam Investment and Finance has got in-principle approval from the Reserve Bank of India to set up a payments bank. The payments bank is expected to be a 100% subsidiary of Cholamandalam and expected to have a nationwide presence. However, the firm plans to partner with those who can bring technology or provide access to a broader customer base in the near future.

Cholamandalam Investment and Finance Company Limited is the financial services arm of Murugappa group, an INR 269 billion Indian conglomerate with a presence in 28 businesses. Cholamandalam commenced business as an equipment financing company and has today emerged as a comprehensive financial services provider offering vehicle finance, home loans, home equity loans, SME loans, investment advisory services, stockbroking, and various other financial services to customers.

Cholamandalam currently has 534 branches spread across the country and has a customer base of over 750,000 customers, most of whom are truck drivers and small- and medium-business owners. It would be essential to note that 71% of the 534 branches are in rural areas while the other 29% are in urban and semi-urban areas. Looking at the RBI’s objective of setting up payments banks, which was to augment financial inclusion by providing small savings account and payment services to the migrant workforce, low-income households, and small businesses, it is a no-brainer that Cholamandalam got the license.

Cholamandalam’s parent company Murugappa adds further value to this proposition. The Murugappa group ecosystem offers an even larger base of rural customers. It is estimated that the group together has over 3.5 million rural customers. Key customer segments of Murugappa Group’s other subsidiaries are:

  • Coromandel International: End Customers are farmers; the company has 7,000+ dealer networks spread across India, especially in rural areas.

  • DBS Cholamandalam Asset Management Limited: End customers are retail and institutional investors; the company has 200,000+ customers.

Cholamandalam plans to use both technology and its physical footprint to reach out to its prospective customers. It is evident from the customer segments (farmers, drivers, and low-income groups apart from SMEs) that they would focus on financial inclusion. However, the group has to overcome two significant concerns. At first, the group has no previous experience in financial technology and will undoubtedly have to partner with a technology provider. Similarly, the current customers of the company are low-value and low-income customers. As we all know, ‘payments’ is a low-margin play, and for small transactions, it would take a lot of effort and volume to make it profitable.

Keep reading

See all blogs
Blog
Reimagining Trust for a New Era: Get Ready for Improve 2025

Improve 2025 is your essential event to the future of digital customer experience, offering cutting-edge insights and strategies to reimagine identity, authentication, and trust using AI and other innovative technologies.

Prove
July 8, 2025
Blog
Blog
How Sponsor Banks Can Thrive in the Era of Heightened BaaS Scrutiny

Discover how sponsor banks can navigate increased scrutiny in the Banking-as-a-Service (BaaS) landscape. Learn strategies to ensure compliance, mitigate risks, and foster sustainable growth in this evolving era.

Mary Ann Miller
July 2, 2025
Blog
Blog
How Prove and authID Are Cutting Off Deepfake Fraud at the Source

Learn how Prove Identity and authID are uniting to combat AI-generated fraud and deepfakes, delivering secure, privacy-preserving identity verification that halts attackers before they create fake digital identities.

Prove
June 26, 2025
Blog