You may have heard the term “payment banks” for recent few days. It is very much in news for past 1 year. If you may not have heard the term Payment Banks then read our this article. Today Masalaread.com is going to tell you all about Payment Banks, how payment banks will be different from present banks, features of payment banks, what are the objectives of payment bank.
What are Payment Banks, Objective and Features ??
“Payment Bank” is a new term. Reserve Bank of India (RBI) constituted a ‘Committee on Comprehensive Financial Services for Small Businesses and Low Income Households” headed by Nachiket Mor in September 2013.
After detailed analysis, Nachiket Mor Committee submitted its final report on recommendations by January 2014. One of the key recommendation was the formation of a new category of banks called payment banks.
Recent Devlopment and news on Payment Banks
The above was followed by announcement in Union Budget 2014-2015 (presented on July 10, 2014) wherein it was decided that “After making suitable changes to current framework, a structure will be put in place for continuous authorization of universal banks in the private sector in the current financial year. RBI will create a framework for licensing small banks and other differentiated banks. Differentiated banks serving niche interests, local area banks, payment banks etc. are contemplated to meet credit and remittance needs of small businesses, unorganized sector, low income households, farmers and migrant work force”.
Taking cues from the Budget, RBI issued the draft guidelines in July 2014 itself on payments banks and small banks as differentiated or restricted banks. Based on the feedback RBI came out with final guidelines for Payment Banks in November 2014, and called the applications from entities which are interested to start such banks.
What are Payment Banks or Define a Payment Bank :
- Definition : Payment Bank can be defined as a type of bank which is non full service niche bank. Banks licensed as Payment Bank can receive and remit the deposit only. They cannot carry lending activities.
- Payment Banks can issue ATM/debit cards, but can not issue credit cards as Credit Card is also a type of lending activity.
What is the Objective of Creating Payment Banks in India :
The main objective behind the creation of payment bank is to help india to acheive its financial inclusion target.
Payment Bank will be highly useful for migrant labourers, low income households, small businesses, and other unorganised sector entities.
As per guidelines by RBI – the objectives of setting up of payments banks will be to further 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.
Some Rules and Regulations for Payment Banks :
- Minimum Paid up equity Capital : 100 crore.
- For the first five years, the stake of the promoter should be 40% minimum.
- Foreign share holding will be allowed in these banks as per the rules for FDI in private banks in India.
- The bank should be fully networked from the beginning.
- The bank can accept utility bills. It cannot form subsidiaries to undertake non-banking activities.
- Initially, the deposits will be capped at Rs.1,00,000 per customer, but it may be raised by the RBI based on the performance of the bank. The bank cannot undertake lending activities.
- 25% of its branches must be in the unbanked rural area.
- The Term “Payment Bank” must be used to differentiate it from other types of bank.
- The banks will be licensed as payments banks under Section 22 of the Banking Regulation Act, 1949 and will be registered as public limited company under the Companies Act, 2013.
- 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.