Payments banks will receive deposits and provide remittances to the customers. They can also issue ATM/debit cards.
Reserve Bank of India (RBI) on Wednesday gave nod to 11 entities (Aditya Birla Nuvo, Airtel M Commerce Services, Cholamandalam Distribution Services, Department of Posts, Fino PayTech, National Securities Depository, Reliance Industries, Dilip Shantilal Shanghvi, Vijay Shekhar Sharma, Tech Mahindra and Vodafone m-pesa) for setting up of non-lending payments banks. Brought into the India system as a part of the financial inclusion drive, these entities sense a huge opportunity in payments bank’s business model and would leverage on technology. Here’s is all you need to know about payments banks:
What are payments banks?
Payments Bank will be set up as a differentiated bank and shall confine its activities to acceptance of demand deposits, remittance services, Internet banking and other specified services. It can issue ATM/debit cards, however, it cannot carry out lending activities and thus wouldn’t be issuing credit cards.
The ‘in-principle’ approval granted to these banks will be valid for a period of 18 months, during which time the applicants have to comply with the requirements under the guidelines and fulfil the other conditions as may be stipulated by the Reserve Bank.
10 things to know about payments banks:
1) Customers can deposit only up to Rs 1,00,000
2) Payments bank can issue ATM/debit cards but not credit cards
3) Payments and remittance services through various channels can be done
4) Bank would not carry out lending activities.
5) With this, the network of 1,54,000 post offices (including 1,30,000 rural post offices) will be offering banking services to the masses in the country.
6) Payments banks are targeting migrant labourers, low income households, small businesses, and other unorganised sector entities.
7) Initial capital required for a Payments bank is Rs 100 crore
8) Eligibility: Existing pre-paid payment instrument issuers, individuals, professionals, NBFCs, corporate business correspondents, telecom companies, super-market chains, real estate sector cooperatives that are owned and controlled by residents and public sector entities may apply.
9) Promoter’s contribution initially must be 40% for the first 5 years. For foreign holding, it is up to 74% of paid-up capital, on a par with private banks.
The banks must maintain CRR, minimum 75% of demand deposits in government bonds of up to one year and maximum 25% in current and fixed deposits with other scheduled commercial banks for operational purposes and liquidity management.
10) 41 applicants were in the race for payment bank licence, only 11 entities got the RBI nod for in-principle licence. Here is the list of these entities and with whom they are partnering for payments bank.
The prominent names among 30 applicants which lost out in the race a licence include NSE Strategic Investment Corporation Limited promoted by the National Stock Exchange, MG George Muthoot, Videocon d2h and Kishore L Biyani. Payment solutions companies, including Itz Cash Card, Citrus Payment, Smart Payment Solutions, One Mobikwik and Oxigen Services did not make up the grade.
RBI also plans to issue licences for ‘small finance banks’ for which it has received 72 applications. These banks will primarily take up basic banking activities in defined geographies and cater to small business units, marginal farmers, and shop-keepers, among others.