The Indian Banks’ Association (IBA) is gearing up to operationalise the National Payments Corporation

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of India (NPCIL), an organisation aimed at facilitating retail payments in the country.

“We are working to get NPCIL on the move. It is important to have a cost-effective retail payment structure,” CMD of Union Bank of India MV Nair said on Tuesday. NPCIL was incorporated in December 2008. The authorised capital has been set at Rs 300 crore to enable the company to create infrastructure of large dimensions and operate on high volume resulting payment services. According to NPCIL, their services will be offered “at a fraction of the present cost” offered by competitors. However, details of the proposed fee structure were not available.

Speaking at a seminar on infrastructure, finance and governance organised by consultancy firm Skoch, Nair said that a low-cost retail payment structure is an important element to provide financial inclusion in the country. “Banks must meet the challenge of financial inclusion and make the mission fruitful with visible changes within the next 10 year,” he said.

Nair said that the rollout of the Unique Identification (UID) plan by the government will help banks to reduce their cost by make it earlier to follow the know-your-customer (KYC) norms regarding customer identification.

On lending to infrastructure sector, Nair said that banks are facing a problem of maturity mismatch since most of the long-term lending was not backed by deposits of similar maturity. “Share of infrastructure in the total lending of banks is increasing. We are having concerns over maturity mismatch,” he said, pointing out that the share of deposits with maturity of over three years was coming do­wn during recent years even as infrastructure loans as a percentage of total lending by banks was on the rise.

Nair said that the solution might lie in floating long-term infrastructure bonds. “We can go for infrastructure bonds, which is permitted. However, there are concerns over pricing the issue. The bonds have to be priced properly. In the current interest rate scenario, we can issue bonds at around 9 per cent interest rate. If we have to keep a sufficient margin, the lending has to be at over 11 per cent, which is not possible,” he said. Banks were concerned over the fact that they were hitting the exposure norms relating to single party and group exposure, he added.

Speaking on the occasion, chairman and managing director of National Housing Bank, S Sridhar felt that the present banking structure does not have the strength to take care of the estimated financing needs to eliminate problem of housing in the country. “According to our calculations, around Rs 10 lakh crore is the need to eliminate housing problems of the country. The current banking system cannot address the problem,” he said.

On low-cost housing, Sridhar informed that the government is working on a plan to create a risk fund to help banks meet the risks arising out of lending to the poorer section of the population. “The risk fund will provide first-loss guarantee that will help banks to lend to the poor for housing,” he said.

However, he said that the delinquency rate of loans to poor is not high. “Our experience is that the delinquency of loans below 5 lakhs is not different from the overall larger sample of housing loans,” Sridhar, who is also the chairman of Central Bank of India, said.