Payment Bank License
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– Advisory on Payments Bank Business Model
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– Preparation of Payments Bank License Application
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Payment Bank License
What is the Payment Bank?
Payment Bank is allowed by the Reserve Bank of India (RBI). The most deposits confined to these types of Bank currently is INR 1 lakh per client which will be enhanced further. Both the current and savings account can be run under such Bank.
The payments bank will be enrolled as a public limited company under the Companies Act, 2013, and authorized under Section 22 of the Banking Regulation Act, 1949, with particular licensing limitations restricting its activities largely to acceptance of demand deposits and provision of payments and its services.
They can allot service linking to debit cards, online banking mobile banking and also ATM cards. Payment Bank is also known as differentiated Bank will be allowed to set up outlets (branches), ATMs, business correspondence, etc. But will be restricted to activities authorized to Bank under the Banking Regulation Act, 1949. The minimum paid-up capital of the payment bank shall be 100 crores. These Payment banks are licensed and certified under the regulatory body.
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Regulatory Acts which oversees Payments Bank
A Payment Bank must get enrolled under these Government Acts and the payments bank license is given by the compliance of these acts.
Companies Act, 2013
Reserve Bank of India Act, 1934
Banking Regulation Act, 1949
Payment and Settlement Systems Act, 2007
Foreign Exchange Management Act, 1999
Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961
Eligibility for Payment Bank License
The RBI has laid down a long list of qualified players for Payment Bank license as it needs a least paid-up capital of 100 crores. Let’s see who can apply for a Payment Bank License:
All Existing issuers of non-bank Prepaid Payment Instrument (PPI) approved under the Payment and Settlement Systems Act, 2007
Non-Banking Finance Companies (NBFCs)
Professionals or any Individuals
Corporate Business Correspondents (BCs)
Public Sector Entities
Real Sector Cooperatives owned by residents
Mobile Telephone Companies
Companies (Public companies)
Also, a promoter or group of promoters can be available for the Payment Bank License if he/she has a Joint Venture with a current scheduled commercial bank.
Objective of Payment Banks
There is a requirement for transactions and savings accounts for the underserved in the people. Also, payments have both macro-economic advantages for the region supporting those even micro-economic advantages to the recipients. Higher transaction charges of making payments reduce these benefits. Hence, the main purpose of setting up of payment banks will be to moreover financial inclusion by giving.
Small savings accounts and Payments/remittance services to migrant labour workforce, low-income households, small businesses, other random sector entities, and other users, by allowing great volume-low value transactions in deposits and payments/remittance services in a settled technology-driven environment.
The least paid-up equity capital for payments banks must be Rs. 100 crore.
Payments bank must have a leverage ratio of not less than 3 percent, i.e., its external liabilities must not pass 33.33 times its net worth (paid-up capital and reserves). Promoter’s contribution: The promoter’s least first contribution to the paid-up equity capital of such payments bank must at least be 40 % for the first 5 years from the start of its business.
- These banks must have a huge powered Customer Grievances Cell to manage customer complaints.
Benefits of a Payments Bank
Payments banks are regularly changing from traditional banks. Before you apply for a payment bank license, it’s important to understand its fundamental characteristics:
Procedure for payment Bank License
Incorporation of a Public Limited Company: Incorporation of a Public Limited Company along with Companies Act, 2013. RBI regulations, with the central goal of acting as a payment bank.
Filing of application to RBI: Filing of application to Chief General Manager of the RBI (Reserve Bank of India)
Evaluation of Application: EAC (External Advisory Committee) must assess the application & call for information and inquiries with the applicant.
Granting License: RBI license must be given who satisfies all the eligibility criteria for payment bank licenses.
Online Review of license: The name of applicants for bank licenses must be displayed in the official RBI site.
RBI Approvals : In-principle approval to run a bank shall be taken up by RBI. The bank requires to be set up in a time period of 18 months.
Things to remember before applying for payment Bank license
Prevailing deposits, saving bank deposits from people, small businesses are allowed up to some limit as directed.
NRI deposits are not allowed/accepted.
Issuance of ATM/Debit cards
Internet banking services are available underpayment bank. These banks are required to offer low-cost banking solutions. (Compliance of RBI instructions on internet banking, information security, electronic banking, technology risk management, cyber laws is important).
Payment banks can allow payments as a channel (just like RTGS/NEFT/IMPS).
Payment Bank cannot take lending activities.