INDIA is betting that mobile phone vendors, fuel stations and corner stores can help it put basic banking within the grasp of hundreds of millions of its poor people living beyond the reach of traditional bank branches.

    The clock is ticking down to a Feb. 2 deadline for applications to set up so-called payments banks under new rules that would allow successful bidders to offer services such as remittances and deposits, but not loans.

    The regulations announced by the central bank, the Reserve Bank of India (RBI), reflect a realization that traditional banks alone can’t achieve the objective of financial inclusion championed by Prime Minister Narendra Modi.

    In a four-month campaign to end “financial untouchability,” Modi has opened 115 million new bank accounts. Yet of those, 80 million have no money in them, underscoring the huge challenge he faces in delivering on his promise.

    Backers of the payments banks say they could help bring those accounts to life by bridging the gap from bank branches in town to India’s 600,000 villages, making it easier to send money home, collect state benefits or do business deals.

    “There’s an entirely new set of actors,” said Bindu Ananth, a member of the RBI committee that designed the payments banks rules. “We said: Let’s create a regulatory framework that allows the participation of non-banks.”

    Mobile operators and pre-paid wallet players are expected to lead the charge, seeking to add transaction fees to revenue streams from products such as phone minutes and bill payments.

    Retailers are interested too. Future Group, one of India’s biggest with a presence in more than 100 cities, says it will apply for a permit.

    Online players also spy an opportunity to boost client loyalty and scale up volumes. Paytm, a platform that is close to winning backing from Jack Ma, founder of Alibaba Group Holding, will bid.

    “We are aiming at 100-200 million users (overall),” said Vijay Shekhar Sharma, CEO of Paytm, which provides pre-paid wallet services, helps consumers make bill payments online and offers coupon discounts. Paytm now has 20 million users.

    In the most important change, payments banks will be allowed to not only accept cash, but also pay it out, boosting their appeal for low-income savers. Their precursors, Pre-paid Payment Instrument (PPI) providers, were not allowed to pay out cash.

    Payments banks could cut the use of cash in an economy where nine out of 10 transactions are still paid in notes and coins and kick-start the use of low-cost payment forms like mobile money that have been used by only one in every 300 Indians.(SD-Agencies)