Payment Bank License

Payment Bank License

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What are payment Banks?

Payments banks is a new model of banks conceptualized by the Reserve Bank of India (RBI). These banks can accept a restricted deposit, which is currently limited to ₹1 lakh per customer and may be increased further. These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks. Payments banks can issue services like ATM cards, debit cards, net-banking and mobile-banking.

Airtel has launched India’s first live payments bank. Paytm is the second such service to be launched in the country.

What is the main objective of Payment Banks?

There is a need for transactions and savings accounts for the underserved in the population. Also remittances have both macro-economic benefits for the region receiving them as well as micro-economic benefits to the recipients. Higher transaction costs of making remittances diminish these benefits. Therefore, the primary objective of setting up of payments banks will be to further financial inclusion by providing.

Small savings accounts and Payments / remittance services to migrant labor workforce, low income households, small businesses, other unorganized sector entities and other users, by enabling high volume-low value transactions in deposits and payments / remittance services in a secured technology-driven environment.

Procedure for payment Bank License

Step 1:

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.

Step 2:

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.

Step 3:

The EAC (External Advisory Committee) shall evaluate the application, and call for information’s and discussions with the applicant.

Step 4:

RBI license shall be granted who fulfils all the eligibility criteria’s.

Step 5:

Name of applicants for bank license shall be shown in the official RBI site.

Step 6:

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.

Acts governed under payment Bank

  • 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.

Eligible People for Payment Bank License

  • Existing non-bank prepaid payment instrument under the Payment and settlement systems Act, 2007.(They can opt for conversion to payment bank).
  • Individuals/professionals.
  • 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 payment Bank 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 payment bank. These Bank 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).
  • Payment bank can accept remittances as a channel (just like RTGS/NEFT/IMPS).
  • Payment Bank cannot take lending activities.

Frequently Asked Questions on Payment Bank

1. What is Payments Bank?
It is just like a regular bank which serves all your digital transactions without offering any credit facility which means you can open an account, deposit funds, withdrawal money with payments Bank ATM card and make digital transactions.
2. What is the deposit limit of a payment Bank?
Rs. 1 lakh per customer (may be further exceed)
3. Is this an authentic platform?
It is brought into action and licensed by Reserve Bank of India. Any entity capable to run such a platform, first has to come clear on all the regulations set by RBI and then it is granted a license.
4. Who can open Payment bank account?
Anyone with an adhaar card and c mobile number can open payments bank account.
5. How will it utilize its funds?
A payments bank will need to invest 75% of its funds in government securities or treasury bills with maturity up to one year and the minimum capital required to set up a payments banks is Rs.100 crore. It can hold maximum 25% in current and fixed deposits with other scheduled commercial banks for operations and liquidity management.
6. Who can own a piece of the pie?
The licence winner’s minimum initial contribution to the paid-up equity capital should be 40% for the first five years from the commencement of business. The foreign direct investment (FDI) limit remains the same as that for private sector banks—74%. This effectively means that the FDI share for the first five years cannot exceed 60%.

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