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.
Procedure for Payments Banks License
- Incorporation of a public Limited Company, in accordance with the Companies Act, 2013, RBI regulations, with the main objectives of acting as a payment bank.
- Filing of application to Chief General Manager of The Reserve Bank of India.
- The EAC (External Advisory Committee) shall evaluate the application, and call for information's and discussions with the applicant.
- In principle approval to operate as a bank, shall be taken up by The Reserve Bank of India. The bank needs to be set up within the time period of 18 months.
- Name of applicants for bank license shall be shown in the official RBI site.
- RBI license shall be granted who fulfils all the eligibility criteria's.
These banks are being set up to bring in entities who would leverage on the technology for financial inclusion that to in cost effective manner. Payments bank is definitely a good initiative for circulating the digital cash in the economy, which shall help the economy reviving under grass route level.