RBI Regulation for Payment Bank License

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What is Payments Banks?

It is a concept introduced by the Reserve Bank of India (RBI). Maximum deposits are restricted to amount INR 1 Lakh per customer which shall be increased in future. Under these payment banks both the current as well as saving bank account can be operated. They can also provide services related to debit cards, online banking, and mobile banking and ATM cards. Payment banks are also allowed to set up their branches and ATMs. Its activities would be restricted to activities permitted to banks under the Banking Regulation Act 1949. The requirement of the minimum capital for payment bank shall be 100 Crores. Under this NRI deposits are not allowed and accepted. Payment banks are not allowed to do lending activities.

Payment Bank License

The main objective of the payment bank is to provide small saving account and another object is to extend the financial services to small business, migrant labor force, low-income households and the unorganized sector in India.

Who all are eligible to apply for Payments banks license?

· Existing non-bank prepaid payment instrument under the Payment and settlement systems Act, 2007.

· Individuals/Professionals.

· Non-Banking Finance Companies.

· Business correspondents.

· Mobile telephone companies.

· Supermarket chains.

· Public Companies.

· Real sector cooperatives.

· Public Sector Entities.

RBI has given approval to 11 entities to establish payment bank in India. It is valid for 18 months according to RBI guidelines. In case these entities fail to open a payment bank then they will have to surrender principal approvals. If the entities comply with all the requirements then RBI shall consider granting a license to them for the commencement of banking business. These payment banks cannot operate in a full-fledged banking business.

Payment banks are similar to normal banks however they are allowed to do only a few banking services in comparison to normal banks. It is the new entrant in digital India. From very before, bank accounts and credit cards are being used in the online transaction.

Services offered by Payment Banks

Here are the following services provided by the Payments banks in India:

· A payment bank can accept deposits up to Rs. One lakh per individual from its customers.

· One can open a saving/current bank account with payment banks.

· Payment banks can pay interest on deposits.

· Payment banks can transfer payments through branches, ATMs, business correspondence etc.

· Payment banks can issue debit cards and ATM cards to its customers.

· With these payment banks, mobile banking can also be assessed.

· Payment banks can provide internet banking which includes payment mechanism approved by RBI.

· With the help of these payment banks, one can make payment of utility bills also.

· Payment banks are also involved in providing financial services like access to mutual funds, insurance products, pension products, and forex related services subject to conditions imposed by RBI.

Services that cannot be provided by Payment Banks

Here are the following services that cannot be provided by the Payment banks:

· Credit cards cannot be issued by payments banks according to RBI guidelines.

· They cannot deal in relation to lending business. They cannot issue loans to their customers.

· They are not allowed to accept deposits from NRIs (Non-Resident Indians).

· They cannot set up subsidiaries for undertaking non-banking financial services.

Difference between Traditional Banks & Payment Banks

Basis	Traditional Banks	Payment Banks
Acceptance of deposits	Allowed	Allowed
Interest on deposits	Allowed	Allowed
Withdrawal services	Allowed	Allowed
Lending Services	Allowed	Not allowed
Issuance of credit cards	Allowed	Not allowed
Investment products	Allowed	Not allowed
Limit of deposits	No limit	Up to 1 lakh per individual

List of Payments Banks in India

Here is the list of 11 applicants who got “In principal Approval” from the Reserve Bank of India for the opening of a payment bank in India:

· Aditya Birla Nuvo Limited (Idea Cellular )

· Reliance Industries (Joint venture: 70% RIL, 30% SBI)

· Airtel M Commerce Services Limited

· Vijay Shekhar Sharma (PayTM)

· Cholamandalam Distribution Services Limited

· Department of Posts ( India Post )

· Fino PayTech Limited

· National Securities Depository Limited (NSDL)

· Dilip Shantilal Shanghvi ( Sun Pharma )

· Tech Mahindra Limited

· Vodafone M-Pesa Limited

Out of these Airtel is the first payment bank in India to start its operations in India in the year 2016. They are providing 7.25% on deposits in a savings account but they charge 0.65% on withdrawal above Rs. 4000. They are providing good interest rate but charging for withdrawal over a specified limit.

IndiaPost is the second payment bank who started its functioning in the year 2017. They are offering an interest rate of 4.5% to 5.5% on deposits in saving bank account.

Paytm payment Bank has been already launched in May 2017. Initially, they are inviting limited users to open a bank account but it is likely to expand in the coming months. In this current Paytm wallet shall be moved to a current bank account. With this users can open a current or savings account and can access to wide range of financial services.

To launch payment bank, other license holders are also accelerating. They are helping India to move towards a digital economy. It will turn India into a cashless economy. It is a very good step to redefine banking system in India. The dream of “Banking at your Doorstep” will turn out in reality even in the remotest area of India. Payment banks are providing digital innovation to the banking sector. It will bring revolution in the banking sector for the betterment of people of India.