Payments banks are a type of differentiated bank introduced by the RBI for promoting financial inclusion and facilitating payments and remittance flows. They are different types of banks compared to the conventional universal banks as the Payments banks can concentrate in only two types of activities – accepting demand deposits and facilitating payments. RBI also allowed Small Finance Banks for supporting financial inclusion. They have slightly different business activities and regulations.
The RBI has made extensive guidelines for the licensing, regulation and product delivery of Payments Banks though its circular in July 2014. In August 2015, RBI has published the list of 11 payments bank candidates.
Following are the main business and regulatory features of Payments Banks.
|Features||Payments banks (PBs)|
|Objectives||To enhance 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.
|Eligible promoters||(1) Existing non-bank Prepaid Payments Instrument (PPI) issuers
(2) NBFCs Corporate Business Correspondents,
(3) Mobile phone Companies, super market chains, public sector entities etc. Prompter can set a joint venture with a commercial bank to start a payments bank.
Fit and proper criterial applicable for promoters.
|(1) Acceptance of demand deposits, with a maximum balance of Rs 100000 per individual.
(2) Issuance of ATM/Debit cards; but can’t issue credit cards
(3) Payments and remittances through various channels
(4) Can act as BC of another bank
(5) can distribute non -risk sharing simple financial products like mutual funds and insurance products.
|Fund deployment||(1) No lending
(2) CRR applicable
(3) SLR of 75% -comprising of upto one year maturity GSecs/T-bills and the remaining (25%) in deposits with other Scheduled Commercial Banks.
|Capital/Net Owned Fund||Rs 100 crores|
|CRR||Applicable as in Commercial Banks|
|Capital Adequacy Ratio||15 %|
|Participation in Call Money Market and CBLO Market||Permitted to participate in CMM and CBLO as lenders and borrowers.|
|KYC application||Electronic authentication and most of the KYC norms to banks are applicable to PBs.|
Registration and regulation of business
The payments bank will be registered as a public limited company under the Companies Act, 2013, and licensed under the Banking Regulation Act, 1949. In contrast to normal banks, specific licensing conditions will be applicable to Payments banks. This is to restrict their activities mainly to acceptance of demand deposits and provision of payments and remittance services. Payments and Settlement Systems Act, 2007 will be a binding legislation for Payments Banks.