NSDL Payments Bank eyes 'unique capital markets' positioning post 'scheduled bank' status

A non-bank backed broking firm -- like Groww, Zerodha, Angel One, Motilal Oswal Financial Services, 5paisa or IIFL among others – can now offer such 3-in-1 accounts to potential clients by pitching NSDL Payments Bank as the preferred banking partner.

NSDL Payments Bank, which has received the ‘scheduled bank’ status from the Reserve Bank of India (RBI), is working on a strategy to become a so-called ‘capital market bank’ with a unique 3-in-1 account offering while collaborating with broking entities that do not have the backing of a bank, said sources familiar with the development.

The payments bank, which is promoted by the country’s largest depository firm, National Securities Depository Ltd (NSDL), plans to collaborate with broking firms to offer a combination of a bank account, demat account and a trading account all under one roof – a unique offering that no other payments bank can offer – thanks to its parentage.

“A scheduled bank status will help it operate like a normal bank and it can work with broking firms to offer quick turnaround 3-in-1 accounts to potential clients and investors,” said a person familiar with the strategy.

“Currently, that advantage is available only to bank-backed broking firms but if you see the data on active clients, new-age discount broking firms boast of the largest base of such clients. This will hugely benefit such broking firms,” added the source.

Simply put, a non-bank backed broking firm – like Groww, Zerodha, Angel One, Motilal Oswal Financial Services, 5paisa or IIFL among others – can now offer such 3-in-1 accounts to potential clients by pitching NSDL Payments Bank as the preferred banking partner.

This assumes significance as most broking firms are already engaged with NSDL as depository participants and hence the whole process of linking accounts would be quite seamless.

“NSDL Payments Bank’s 3-in-1 account is a game-changer, offering a one-stop solution for investors. It solidifies NSDL’s position in the capital markets ecosystem and enables it to function as a full-fledged bank, facilitating seamless investing and banking experiences,” said Narinder Wadhwa, MD & CEO, SKI Capital Services.

“With plans to implement ASBA-like mechanisms for secondary market transactions, it aims to revolutionise payments by enabling fund blocking instead of upfront debits -- enhancing trust, reducing settlement risk, and improving liquidity management for investors and brokers alike,” added Wadhwa.

In a similar context, Ajay Garg, Director and CEO, SMC Global Securities, said that NSDL Payments Bank getting ‘scheduled bank’ status is a highly positive development especially for the capital markets.

“What is particularly noteworthy and beneficial is NSDL Payments Bank's intrinsic connection with NSDL, one of the largest depositories in India, which serves a vast base of over 4 crore demat accounts,” said Ajay Garg, Director and CEO, SMC Global Securities.

“This 'Scheduled Bank' status will undoubtedly enhance the trust, efficiency, and interconnectedness within the financial system, allowing for more seamless and robust payment and banking services for this massive investor base. It creates a stronger and more reliable financial artery for millions engaged in capital market activities,” he added.

An email query sent to NSDL Payments Bank remained unanswered till the time of publishing this story.

To be sure, while non-bank backed broking firms can still offer 3-in-1 accounts, the banking aspect of the chain would not be in control of the broking entity as the client would want to continue with the existing bank account. This would entail fresh KYC procedures and compliance checks among other things.

However, as mentioned earlier, with their existing relationship with NSDL, such broking firms would be able to achieve the same goals in a quicker and seamless manner with NSDL Payments Bank.

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