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Five things you should know about 'payments bank'

Finance Minister Arun Jaitley, in his Interim Budget speech on July 10, 2014 had announced setting up of small and differentiated banks. The last date of applying for a 'payments bank' is February 2, 2015 and slew of companies ranging from Airtel to Future Group have decided to knock on Reserve Bank's doors to get one.

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Finance Minister Arun Jaitley, in his Interim Budget speech on July 10, 2014 had announced setting up of small and differentiated banks. The last date of applying for a 'payments bank' is February 2, 2015 and slew of companies ranging from Airtel to Future Group have decided to knock on Reserve Bank's doors to get one. 

He had said, "“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.”

A week later, The Reserve Bank of India (RBI) issued draft guidelines

But what exactly is a 'payments bank'?

The idea behind a payments bank is to further financial inclusion by providing small savings accounts. These banks will mainly be used by payments and remittances to migrant labour workforce, low income households, small businesses and other unorganised sector entities, RBI said. 

Here are five things that you must know about payments bank: 

1. How much money can I deposit in my payment bank account?

The maximum deposit that a payment bank can accept from an individual customer is Rs 1 lakh. 

2. Can I get a credit card? 

No. However, a payment bank can issue you a debit and ATM cards for easy transactions. 

Also Read: Reliance teams up with State Bank of India for payments bank

3. Can I apply for a loan at a payment bank?

No. The Reserve Bank has clearly stated that a payments bank cannot undertaken any lending activity. So you will have to go to your regular bank if you need a loan. 

Also Read: After Airtel, Future Group too applies for Payments Bank licence

4. But how safe is my money in a payments bank?

Apart from maintaining Cash Reserve Ratio (CRR) with the RBI, a payments bank will be required to invest 75% of its demand deposit balances in Statutory Liquidity Ratio (SLR) eligible government securities and treasury bills. 

Moreover, a maximum of 25% will have to be held in current and fixed deposits with other scheduled commercial banks. 

Also Read: Aditya Birla Nuvo applies for payments bank licence

5. How will I use services of a payments bank?

The RBI said it is also open to applicants transacting primarily using the Internet. The Payments Bank is expected to leverage technology to offer low cost banking solutions. 

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