Payments banks

There is a need for transaction and savings account for the under served in the population.  The remittance (payments) has micro-economic benefit for both the recipient and also the area receiving it. But higher transaction cost diminishes the benefits. Hence, the answer is Payments Bank.

Objectives

The payments banks will deepen financial inclusion by providing –

• Small savings account
• Payments or remittance service to labor workforce, low income household, small business, other unorganized sector entities.
• It would enable high volume- low value transactions in deposits and payments remittance service.

Payments banks would be registered as Public Limited Company under Companies Act 2013 and licensed under Banking Regulation Act.

Who can apply for Payments Banks?

• All existing Non-banking PPIs

[PPI- Prepaid Payments Instruments- The payments instruments that facilitate purchase of goods and service against the value stored on such instruments PPI represents the value paid for by the holder (individuals/organizations who acquire prepaid payment instruments for purchase of goods and services). The PPI can be issued as Smart cards, magnetic strip cards, internet accounts, internet wallets, mobile account, mobile wallet, paper voucher etc.]

• Non-Bank Financial Companies (NBFC)
• Corporate BCs
• Mobile Telephone Company
• Supermarket Chain
• Real Sector Co-operatives
• Public Sector Entities

What can they deal in?

• Acceptance of demand deposits and saving bank deposits.
• Payments and remittance service through various channels including branches, BCs and mobile Banking.
• Issue PPI
• Internet Banking
• Functions as Business Correspondents (BCs) of other banks.

Capital

• The minimum paid up voting equity capital for payments bank is 100 crore.
• Should have a net worth of Rs. 100 cr at all times.
• Outside liabilities should not be more than 20 times the net worth.

Small banks

To enhance financial inclusion by

• Provision of saving vehicles to underserved or un-served section of the population.
• Supply credit to small business units, small farmers, micro and small industries and other unorganized sector entities.

The Small banks are to be registered as public company under Companies Act 2013 and licensed under Banking Regulation Act.

Who are eligible?

• Resident individuals/ professionals with 10 years experience in banking and finance companies and societies.
• NBFCs
• MFIs (Micro Finance Institutions)

Where can they operate?

The operation of Small Bank will normally be restricted to contiguous districts in homogenous clusters of State or UTs. This is done so that the banks have a “local feel” and culture.

What will it be allowed to deal in?

Basic banking activities of acceptance and deposits and lending to farmers, small business, MSME, unorganized sector etc.

Capital

• Minimum Paid up voting equity capital for small banks shall be Rs 100 crores.
• It will be required to have a CRR of 15% of Risk Weighted Assets.(Risk Weighted Asset is a measure of the amount of a bank’s assets, adjusted for risk)

Click on the link to read the RBI Draft Guidelines for Licensing of Payments Banks and Small Banks

Logo Source: RBI Website