Payments Banks are a new set of banks licensed by the Reserve Bank of India to further financial inclusion by enabling them to provide:
(i) Small savings/ current accounts below Rs. 1 lakh
(ii) Distribution of mutual funds, insurance products on a non-risk sharing basis and
(iii) Payments / remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users through high volume-low value transactions in deposits and payments / remittance services using a secured technology-driven environment including issuance of prepaid cards etc.
Salient features:
- Payments Banks are differentiated or restricted banks.
- The Payments Bank cannot set up subsidiaries to undertake non-banking financial services activities (hire purchase, leasing etc.) nor can it undertake lending business.
- It may choose to become a banking correspondent (BC) of another bank for credit and other services which it cannot offer.
- Since liquidity is the most important aspect required for such banks they will be bound by the reserve requirement rules of RBI (CRR, SLR etc.).
- The minimum paid-up equity capital for payments banks shall be Rs. 100 crores.
- The Payments Bank are proposed to be registered as a public limited company under the Companies Act, 2013, and licensed under Section 22 of the Banking Regulation Act, 1949.
The proposal for creating payments banks stemmed from the report of the Committee on Comprehensive Financial Services for Small Businesses and Low Income Households (Chairman: Dr. Nachiket Mor) submitted in January 2014.
Non-Banking Finance Companies (NBFCs), corporate Banking Correspondents (BCs), mobile telephone companies, super-market chains, companies, real sector cooperatives and public sector entities may apply to set up a Payments Bank. Even banks can take equity stake in a Payments Bank to the extent permitted under Section 19 (2) of the Banking Regulation Act, 1949. In pursuance to this, Department of Posts is launching India Post Payments Bank (IPPB) as a Public Limited Company with 100% Government of India (GOI) equity Payment Bank.
