Payment Banks in India- At a Glance (PDF Version)

Dear Readers,
RBI granted 'in-principle' approval to the 11 applicants to set up Payment Banks. Reserve Bank gets 41 applications for payments banks.

Payment Banks in India

Key features of the Payments Banks guidelines are:

a) Objectives: 

The objectives of setting up of payments banks will be to further financial inclusion by providing (i) small savings accounts and (ii) payments/remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users.

b) Registration: 

 The Reserve Bank grants a license for commencement of banking business under Section 22(1) of the Banking Regulation Act, 1949.

c) Committee on Payment Banks: 

Dr. Nachiket Mor Committee

d) Validity: 

 RBI's “in-principle” nod will be valid for a period of 18 months, during which time the applicants have to comply with the requirements under the Guidelines and fulfill the other conditions as may be stipulated by the Reserve bank.

e) Eligibility: 

Existing non-bank Pre-paid Payment Instrument (PPI) issuers; and other entities such as individuals / professionals; Non-Banking Finance Companies (NBFCs), corporate Business Correspondents(BCs), mobile telephone companies, super-market chains, companies, real sector cooperatives; that are owned and controlled by residents; and public sector entities may apply to set up payments banks.

A promoter/promoter group can have a joint venture with an existing scheduled commercial bank to set up a payments bank. However, scheduled commercial bank can take equity stake in a payments bank to the extent permitted under Section 19 (2) of the Banking Regulation Act, 1949.

Promoter/promoter groups should be ‘fit and proper’ with a sound track record of professional experience or running their businesses for at least a period of five years in order to be eligible to promote payments banks.

f) Capital Requirement: 

 The minimum paid-up equity capital for payments banks shall be Rs. 100 crore. The payments bank should have a leverage ratio of not less than 3 per cent, i.e., its outside liabilities should not exceed 33.33 times its net worth (paid-up capital and reserves).

g) Operation: 

Acceptance of demand deposits. Payments bank will initially be restricted to holding a maximum balance of Rs. 100,000 per individual customer. Issuance of ATM/debit cards. Payments banks, however, cannot issue credit cards. Payments and remittance services through various channels. Distribution of non-risk sharing simple financial products like mutual fund units and insurance products, etc.

h) Loans & Advances: 

Payment bank cannot undertake lending activities but can distribute the non-risk sharing simple financial products such as mutual fund units and insurance products, etc. 

These banks also should maintain Cash Reserve Ratio (CRR) with the Reserve Bank, it will be required to invest minimum 75 percent of its demand deposit balances in Statutory Liquidity Ratio (SLR) with maturity up to one year and hold maximum 25 per cent in current and time or fixed deposits with other scheduled commercial banks for operational purposes and liquidity management.

i) Foreign Shareholding: 

 The foreign shareholding in the payments bank would be as per the Foreign Direct Investment (FDI) policy for private sector banks as amended from time to time.

j) Names of Payment Bank:

1. Aditya Birla Nuvo Limited
2. Airtel M Commerce Services Limited
3. Cholamandalam Distribution Services Limited
4. Department of Posts
5. Fino PayTech Limited
6. National Securities Depository Limited – Director G. V. Nageswara Rao
7. Reliance Industries Limited - Joint ventured with SBI
8. Sun Pharma - Dilip Shanghvi, Managing Director of Sun Pharmaceuticals.
9. Paytm – Founder of Vijay Shekhar Sharma
10. Tech Mahindra Limited
11. Vodafone m-pesa Limited

Payment Banks in India- At a Glance (PDF Version)

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