What are Payment Banks?
It is new model of banks by the RBI, which can accept restricted deposits currently limited to Rs 1 lakh per customer with the scope to increase further in future. The key features of the banks are lower charges with account, higher interest rate, conveyance to carry out door to door banking services. Generally banks tie up with BC’s and other banks to provide services that do not come carry the scope of credit risk. In India, Bharti Airtel is the first live payment bank.
Why Payment Banks?
The entire object of payment banks is to broaden the scope of payment and financial services to people with low incomes like low-income households, small businesses, migrant-labour workforce etc.
It all started with in sep. 2013 where RBI constituted a committee to study comprehensive financing services to propose measures to achieve financial inclusion and to widen access to financial services. The key suggestion of the committee was to bring in specialised banks (payment banks) to those who have low income and run small businesses so by jan 2016, every Indian Resident can hold a global bank account
Eligibility Criteria for Payment Finance Banks:
- Required to maintain CRR with the RBI on its outside demand and time liabilities.
- Invest min 75% of its demand deposit balances in SLR eligible Government securities/treasury bills with maturity upto 1 year.
- Hold max 25% in current and time/fixed deposits with other scheduled commercial banks
- Minimum paid-up capital for payment banks shall be Rs 100 crores
- Leverage ratio should not be less than 3%
- Promoter’s minimum initial contribution to the paid-up equity capital at least be 40 per cent for the first five years.
- Foreign shareholdings should be as directed by FDI policy for private banks which is amended time to time.
Procedure for Filing Application
- Step #1: According to Rule 11 of the Banking Regulation (Companies) Rules, 1949, applications be submitted in the prescribed form (Form III) to Chief General Manager, Department of Banking Regulation, Reserve Bank of India, 13th Floor, Central Office Building, Mumbai – 400 001.
- Step #2: The applicants should also furnish the business plan and other requisite information as indicated. Applications were accepted only till the close of business as on January 16, 2015.
- Step #3: After gaining experience in dealing with payments banks, applications will be received on a continuous basis. (However, these guidelines are subjected to periodic review and revision.)
Scope of Activities:
- Acceptance of demand deposits i.e. current and saving bank deposits.
- Payment and remittance services through various channels.
- Issuance of PPI as per instructions issued on timely basis under the PSS act.
- Internet Banking.
- Functioning as business correspondent (BC) of other banks
- Deployment of Funds
Payment Banks approved by RBI:
- Idea Payment Bank
- Airtel Payment Bank
- Cholamandalam Distribution Services Ltd.
- India Post Payment Bank (IPPB)
- Fino Payment Ltd.
- National Security Depository Ltd.
- Reliance Industries Ltd.
- Dilip Shantilal Shanghvi
- Vodafone m.pesa
- Tech Mahindra Ltd
Frequently Asked Questions on Payment Finance Bank
Can payment banks appoint its promoter group company as its corporate BC?
Yes, payment banks can appoint its promoter company as its corporate BC on basis of arm’s length basis and also subjected to the RBI guidelines on BC’s.
Will securities premium be considered for computing capitalisation for computing capitalisation of the payment banks?
Yes, securities premium be taken into account for computing capitalisation, the minimum capital requirement is of Rs. 100 crores and that will include share premium too provided there is no other differential pricing of shares.
Can the promoter entity and the payment banks have common directors?
Yes, the promoter entity and the payment banks have a common director but that director cannot be the independent director of the Bank.
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