What are payments Banks?
Payment banks are conceptualized by the Reserve Bank of India (RBI). The maximum deposits restricted to these types of banks currently is INR 1 lakh per customer which shall be increased further. Both the current as well as savings account can be operated under such banks. They can issue service relating to debit cards, online banking mobile banking and also ATM cards. Payment banks also known as differentiated banks shall be permitted to set up outlets (branches), ATMs, business correspondents, etc. but would be restricted to activities permitted to banks under the Banking Regulation Act, 1949. Minimum paid up capital of payments bank shall be 100 crores.
Acts governed under payments banks
- Companies Act, 2013.
- Banking Regulation Act, 1949.
- Reserve Bank of India Act, 1934.
- Foreign Exchange Management Act, 1999.
- Payment and settlement systems Act, 2007.
- Deposit Insurance and credit Guarantee corporation Act, 1961.
- Other applicable rules and regulations that may come from time to time.
The primary objective of Payments banks are to provide:
Small savings accounts
Payments/remittance services to labour workforce, low income households, unorganized sectors, small businesses, high volume low value transactions etc.
- Existing non-bank prepaid payment instrument under the Payment and settlement systems Act, 2007.(They can opt for conversion to payments bank).
- NBFC's (non-banking finance companies).
- Business correspondents.
- Mobile telephone companies.
- Supermarket chains.
- Companies (public companies).
- Real sector cooperatives.
- Public sector entities.
The highlighting of Payments Banks as follows
- Current deposits, saving bank deposits from individuals, small businesses are permitted up to a certain limit as prescribed.
- NRI deposits are not allowed/accepted.
- Issuance of ATM/Debit cards (although no credit cards).
- Internet banking services are open under payments bank. These banks are expected to offer low cost banking solutions. (compliance of RBI instructions on internet banking, information security, electronic banking, technology risk management, cyber laws is necessary).
- Payments bank can accept remittances as a channel (just like RTGS/NEFT/IMPS).
- Payments banks cannot take lending activities.