Payment Bank in India
As the name Suggest, Payment Bank in India refers to Payment and Transfer of money. It operates in a very Small Scale. It works like a Bank but do not distribute Loans, cannot accept term deposit, cannot issue credit cards but it can Accept Current Account and Saving Account. This is established under the recommendation of the Nachiket Mor Committee.
Why Payment Bank is Required?
Payment Bank is opened to add more people in the banking or financial activities. The main purpose for this is to broaden the financial and payment services and promote the concept of financial inclusion (Add major population in banking or financial activities ) to the unbanked rural areas, low household income, small business, migrant labor workers through secure technology. Through Payment Bank, RBI wanted to enter the financial activities or services to the remote areas of the country where Banks are not present. Thus, Remote people can do transaction anytime thus benefits cash Digitalization as well.
Services Provided through Payment Bank
Some of the Services Provided through Payment Bank are as follows:
- It can accept deposit for Rs. 2 lac per customer
- We can pay bills like Electricity Bill, Water Bill, Can buy a Cylinder, can Recharge Phone etc through Payment Bank
- It works as an Agent for Particular Bank. Let us understand, Payment Bank deals with the Bank that If a person can deposit more than Rs. 2 Lac then I will send my customer to you and will earn commission from you . Also, If my customer wants any Loan (as we know payment bank do not provide loan) I will send it to you and will earn commission. So, The Payment Bank works a Correspondent or an Agent of a Bank.
- It can distribute financial products like Insurance, Mutual Fund and Pension Product. We can Buy or can do Payment through Payment Bank.
- It can distribute ATM and Debit cards .
- It can accept or send money through multiple banks under a payment structure or mechanism approved by RBI which are RTGS/NEFT/IMPS.
Payment Banks in India
Initially there were 41 applicants were submitted for the License, Out of Only 11 applicants were given License. Within few years 5 were out of business/they shut down their operation due to surrender of Licenses and non-functioning.
Currently, There are 06 Payment Banks in India. Below are the details of Payment Bank
|Payment Bank||Established||Head Quarters||Partner Bank|
|Airtel Payment Bank||Jan 2017||New Delhi||Kotak Mahindra Bank|
|Paytm Payment Bank||Nov 2017||Noida||IndusInd Bank|
|India Post Payment Bank||Jan 2017||Raipur & Ranchi||No Partner Bank. It is 100% Government based.|
|Jio Payment Bank||April 2018||Navi Mumbai||State Bank of India|
|Fino Payment Bank||April 2017||Mumbai||ICICI Bank|
|NSDL Payment Bank||Oct 2018||Mumbai||IDBI|
RBI Guidelines for Payment Bank
Below is the RBI Guidelines for Payment Bank
- The Payment Bank is Registered as a Public Limited company under the Companies Act 2013 and the License is issued under Section 22 of the Banking Regulation Act 1949. The License is valid till 18 Months.
- RBI has given certain measures for the Promotors to Qualify for getting License for Payment Bank. The Qualifying measures are:
o The minimum capital required to get a License for Payment Bank is Rs. 100 crores
o The Promotors can be either Individual Professional OR Telecom Companies OR Public Sector Undertakings OR Chain of Supermarkets OR Public Companies OR Non-Banking Financial companies (NBFC) OR Corporate Business Correspondence OR It must be Existing Non-Bank Pre-Paid Payment Instrument Issuers (these are companies Incorporated and Registered under the Companies Act 1956/2013 and can operate a payment system for issuing PPI to individuals/organizations after authorization from RBI) authorized under the Payment and Settlement System Act 2007.
- Payment Bank can convert into Small Finance Bank after 05 years of its operation but the Minimum Capital required would be Rs. 200 crores.
- The Promotors of the Payment Bank must have at least 40% of the Shares/Equity capital for at least 05 years after the establishment of the Bank and can be reduced to 26% after 12 years.
- Payment Bank have to open 25% of the Branches in Unbanked Rural areas.
- FDI (Foreign Direct Investment) Limit must not be more than 74% . It means if a foreign company want to do the same business, then he can invest maximum 74% of the capital for other 26%, he has to find the Indian company
- The Payment Bank have to invest 75% of the Demand deposit Balance in Government Securities and 25% in Banks.
- The Bank have to use the term “Payment Bank” to differentiate themselves from the other Bank.
- Payment Bank cannot Accept NRI (Non Resident Indian) deposits.
- The Payment Bank must have a Customer Grievances cell for Customer Complain and Support.
- The Payment Bank cannot set up branch or division to accept Non-Banking Financial Service Activities.
- The Payment Bank must maintain certain Cash Reserve Ratio (Minimum amount of Cash is to be deposited as reserved)
- The Payment Bank need to take approval from RBI if any acquisition of more than 5% is taken place.
The World is moving towards Digitalization. It is very Risky to have Cash in your Pocket. The Payment Bank is the Alternative in which we have the safe money and can do transaction without any delay. Now a days, you do not have to go to a particular place for payment of your utility bills, you can do payment through your payment bank, Thus, saving time and money. It helps in reaching out to the rural areas where there are no banks. It solves the purpose of low-income people, migrant labors etc. Thus, Payment Bank is the future with additional features.