Payment Banks: Revolutionising the Banking Sector
In September 2013, the Reserve Bank of India constituted a committee headed by Dr Nachiket Mor to study Comprehensive financial services for small businesses. The committee submitted its report to RBI in January 2014.One of the key suggestions of the committee was to introduce specialised banks or ‘ Payment Banks ‘ to cater to the lower income groups and small businesses so that by January 1, 2016 each Indian resident can have a global bank account.
Payment Banks are like any other bank but without involving any credit risk because it can’t advance loans or issue credit cards. . It can carry out most banking operations like accept demand deposits (up to Rs 1 lakh), offer remittance services, mobile payments/transfers/purchases and other banking services like ATM/debit cards, net banking and third party fund transfers.
A Payment Bank Can:-
- Accept Demand deposits upto Rs. 1 Lakh.
- Issue Debit Cards, ATMs.
- Offer Payment Services, Net banking, Fund Transfer, Online purchases.
- Open Saving Account and also Current Account.
A Payment Bank Can’t:
- Issue Credit Card.
- Advance Loans.
Regulations followed by Payment Banks:
- The Minimum Capital Required is Rs. 100 Crores.
- Promoters Stake should be minimum 40% for first five years.
- FDI rules is as it is for Private banks.
- The voting right of any shareholder is capped at 10%, which can be raised to 26% by Reserve Bank of India. Any acquisition of more than 5% will require approval of the RBI.
- The majority of the bank’s board of directors should consist of independent directors, appointed according to RBI guidelines.
- It cannot form subsidiaries to undertake non-banking activities.
- Limit of deposits will be capped at ₹100,000 per customer, but it may be raised by the RBI based on the performance of the bank.
- The bank cannot undertake lending activities.
- 25% of its branches must be in the unbanked rural area.
- The bank must use the term “payments bank” in its to differentiate it from other types of bank. 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.
Payment Banks In India:
On 19 August 2015, the Reserve Bank of India gave “in-principle” licences to eleven entities to launch payments banks:
- Aditya Birla Nuvo
- Airtel M Commerce Services
- Cholamandalam Distribution Services
- Department of Posts
- FINO PayTech
- National Securities Depository
- Reliance Industries
- Sun Pharmaceuticals
- Tech Mahindra
- Vodafone M-Pesa
Out of these, three have surrendered their licenses:
- Chalomandalam Distribution Services
- Sun Pharmaceuticals
- Tech Mahindra.
The “in-principle” license is valid for 18 months within which the entities must fulfill the requirements. They are not allowed to engage in banking activities within the period. The RBI will consider grant full licenses after it is satisfied that the conditions have been fulfilled.
First Payment Bank-Airtel Payment Bank Limited:
On 23rd November 2016, India’s first Payment Bank goes live-Airtel Payment Banks starts pilot services in Rajasthan. Some Important points of airtel Payment bank are as follows:
- Quick and Paperless Account opening process using aadhaar based e-KYC. This requires no document at all, only customers Aadhaar number is needed.
- Customer’s Airtel mobile number will be his Account Number.
- Interest Rate is 7.25% p.a. on deposits.
- Money can be transferred to any bank account in India.
- Personal Accidental Insurance of Rs. 1 Lakh on every saving account.
- Easy deposit and withdrawal facility across a wide network of 10000 Airtel retail outlets.
- Download Airtel money App to use services of Airtel payment Bank.
Second Payment Bank- PayTM Payment Bank:
On 3rd Jan. 2017, PayTM announced that it has received final approval from RBI for payment bank. Finally Online Mobile Wallet major “PayTM” is going to launch its Payment Bank in February This year. The payments bank would start its operations with Rs 400-crore initial capital and the first branch would be set up in Noida, UP. The first branch in Northeast would be opened in Guwahati.
Third Payment bank- India Post Payment Bank:
On 30-01-2017, India Post Payments Bank becomes the third entity to receive payments bank permit after Bharti Airtel and Paytm.
- India Post Payments Bank (IPPB) today started its operations by rolling out pilot services in Raipur and Ranchi.
- The bank will offer an interest rate of 4.5 per cent on deposits up to Rs 25,000; 5 per cent on deposits of Rs 25,000-50,000 and 5.5 per cent on Rs 50,000-1,00,000.
- The paid up equity of the new bank is Rs 800 crore, of which the government has already infused Rs 275 crore.
Author: CA Ashok Kumar