Some details about Payment Banks

Payment Banks

1.  The objectives: 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.

2. Activities: Acceptance of demand deposits. Payments bank will initially be restricted to holding a maximum balance of Rs. 100,000 per individual customer.
3. Issuance of ATM/debit cards. Payments banks, however, cannot issue credit cards.
4. Payments and remittance services through various channels.
5. BC of another bank, subject to the Reserve Bank guidelines on BCs.

6.  Distribution of non-risk sharing simple financial products like mutual fund units and insurance products, etc.

7.   Apart from amounts maintained as Cash Reserve Ratio (CRR) with the Reserve Bank on its outside demand and time liabilities, it will be required to invest minimum 75 per cent of its "demand deposit balances" in Statutory Liquidity Ratio(SLR) eligible Government securities/treasury bills with maturity up to one year and hold maximum 25 per cent in current and time/fixed deposits with other scheduled commercial banks for operational purposes and liquidity management.

8.      The minimum paid-up equity capital for payments banks shall be Rs. 100 crore.

9. 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).

10.   Promoter's contribution: The promoter's minimum initial contribution to the paid-up equity capital of such payments bank shall at least be 40 per cent for the first five years from the commencement of its business.

11. The operations of the bank should be fully networked and technology driven from the beginning, conforming to generally accepted standards and norms.
12. The validity of the in-principle approval issued by the Reserve Bank will be eighteen months.
13. The voting rights will be regulated by the Banking Regulation Act, 1949. The voting right of any shareholder is capped at 10%, which can be raised to 26% by Reserve Bank of India (RBI). Any acquisition of over than 5% will require approval of the RBI. The majority of the bank's board of director should consist of independent directors, appointed according to RBI guidelines.

14. The bank can accept utility bills. It cannot form subsidiaries to undertake non-banking activities.

15.   The bank cannot undertake lending activities.

16.   25% of its branches must be in the unbanked rural area.

17.   The bank must use the term "payments bank" in its name to differentiate it from other types of bank.

18.  The banks will be licensed as payments banks under Section 22 of the Banking Regulation Act, 1949 and will be registered as public limited company under the Companies Act, 2013.

19.  On 23 September 2013, Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, headed by Nachiket Mor, was formed by the RBI.On 7 January 2014, the Nachiket Mor committee submitted its final report. Among its various recommendations, it recommended the formation of a new category of bank called payments bank. 

20.   There were 41 applicants. External advisory committee (EAC) headed by Nachiket Mor evaluated the licence applications.  On 19 August 2015, the Reserve Bank of India gave "in-principle" licences to eleven entities to launch payments banks.

21.  -They can issue debit cards and ATM cards usable on ATM networks of all banks.

22.  -They can provide forex cards to travellers, usable again as a debit or ATM card all over India.

23.  The payment banks are only allowed to invest the money customers deposit into government securities.

24.  This is also very important when considered from the perspective of financial inclusion, as someone could now fill cash into a m-Commerce bank account from Delhi, and a relative in a small town who holds the debit card could withdraw cash from any ATM frictionlessly, or even in a more rural location, through any point of sale terminal with a "business correspondent", essentially an authorised partner for the bank. It's these partners - and theoretically the small convenience shop in a village that sells mobile recharges could be one of them - that will serve the purpose of bank branches, though the payment banks can set up branches if they want.

25.  Payment banks can be integrated with your savings bank accounts via IMPS and NEFT transfers. The payment banks ATM or debit cards will also work on all banks' machines.

26.  Payment banks can't accept NRI deposits.

27.  No minimum balance condition.