Airtel M Commerce Services Ltd (AMSL), a wholly owned subsidiary of Bharti Airtel, is to bid for a payments bank licence in India.

The firm wants to convert its existing prepaid payment instrument licence into one of the country’s new banking licences. The deadline for bids is next week (2 February).

AMSL also announced that, subject to winning a payments bank licence from the Reserve Bank of India, it would sell a 19-per-cent stake to Kotak Mahindra Bank.

AMSL offers mobile money under the Airtel Money brand.

Airtel Money’s service was launched in 2011 and was the first mobile-based, prepaid payment instrument service in the country.

Rival Vodafone has also been mooted as a potential bidder for a payments bank licence.

The new type of bank, which offers cash-in, cash-out plus handles money transfers, is intended to lure in those users outside the conventional banking sector.

The Indian government hopes to see the successful applicants target low-income households, particularly in the countryside, as well as small businesses.

The first launches could be towards the end of 2015.

Operators will face competition from others interested in low-income banking. Mobile payment platform Paytm has said it will be among the applicants. Chinese giant Alibaba is thought to be in talks about buying a stake in the Indian firm.

Retailers are also thought to be interested. For instance, the Future Group — with a presence in more than 100 cities — has confirmed its interest. Any groups with a significant rural presence — for instance the country’s post office — could also throw its hat in the ring next week.