The Reserve Bank of India (RBI) on Wednesday gave an "in-principle" nod to 11 entities for setting up payment banks. Here's all you need to know payment banks.
The Reserve Bank of India (RBI) on Wednesday gave an "in-principle" nod to 11 entities for setting up payment banks.
The 11 entities include some big names such as, Reliance Industries, Bharti Airtel, Vodafone and Aditya Birla Nuvo.
What are payments banks?
Characteristics
-- Payment banks are a non-full service banks, whose main objective is to accelerate financial inclusion.
-- These banks have to use the word 'Payment Bank' in its name which will differentiate it from other banks.
-- They will need to have a minimum paid-up equity capital requirement of Rs 100 crore.
-- Payment banks aren't allowed to engage into lending activities.
-- While payment banks can issue debit and ATM cards, it is not allowed to issue credit cards to its customers.
-- They will mostly be set up in rural areas to facilitate financial inclusion by taking banking to the unbanked.
-- Payment banks cannot form subsidiaries or undertake any non-banking activities.
-- Under payments banks, the stake of a promoter should be minimum 40% for the first five years.
Activities
- These specialised banks will provide services to small businesses, migrated labour and low income households.
-- Payment banks will provide small savings accounts to its customers.
-- In the beginning, payment banks can accept deposits up to Rs 1 lakh.
-- Will let mobile firms, supermarket chains and others, cater to small scale businesses.
-- The deposits made in payments banks need to be invested in government bonds.
-- They will be allowed to have foreign share holding.
Background of payments banks:
The RBI first came out with the guidelines for payment banks in private sectors in 2013, announcing the licencing on April 2, 2014.
It had, in April last year, granted an 'in-principle' approval to two applicants, asking them to set up shop in the next 18 months.
RBI has said that it intends to use the learning experience garnered through the payment banks licencing exercise to revise guidelines appropriately.
What's new?
Here's a list of the companies, entities and people, that received an "in-principle" nod on Wednesday
1. Reliance Industries Ltd
2. Aditya Birla Nuvo Ltd
3. Airtel M Commerce Ltd
4. Vodafone m-pesa Ltd
5. Tech Mahindra Ltd
6. Dilip Shanghvi
7. Fino PayTech limited
8.National securities depository limited
9. Vijay Shankar Sharma
10. Department of Posts
11. Cholamandalam Distribution Services Ltd.
On the announcement, Finance Minister Arun Jaitley said that payment banks is an important step for the expansion of rural banking.
"Payment bank will ensure more money comes into banking system. Various banks are looking at increasing their rural reach, including big banks like SBI, payments banks will help them realise this," Jaitley said.
Furthermore, Vodafone India and Bharti Airtel thanked RBI for giving them the licence to set up payments bank.
Sunil Sood, MD and CEO, Vodafone India said, "The licence will enable it to build on this further and offer a more comprehensive portfolio of banking and financial products and services, accelerating India's journey into a cashless economy.
Airtel said that they will help bring miilions of unbanked citizens into the banking sector.
(With Agencies)
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