Payment Banks
Bharti
Airtel’s payments bank venture — Airtel M Commerce Services Ltd. — has become
the first entity to receive final approval from the Reserve Bank of India (RBI)
to start a payments bank.
Background:
·
In August last
year, the banking regulator granted in-principle licences to 11 entities to
start payments banks.
·
The
‘in-principle’ approval was valid for 18 months, during which time the
applicants were asked by RBI to comply with the licensing norms.
·
They are not
allowed to engage in banking activities within the period.
·
The RBI will
consider grant full licenses under Section 22 of the Banking Regulation Act,
1949, after it is satisfied that the conditions have been fulfilled.
·
Most of the
players who received the payments licences are yet to apply for the final
licences.
·
On 19 August
2015, the Reserve Bank of India gave "in-principle" licences to
eleven entities to launch payments banks:
1)
Aditya Birla Nuvo
2)
Airtel M Commerce
Services
3)
Cholamandalam
Distribution Services
4)
Department of
Posts
5)
FINO PayTech
6)
National
Securities Depository
7)
Reliance
Industries
8)
Dilip Shanghvi,
Sun Pharmaceuticals
9)
Vijay Shekhar
Sharma, Paytm
10)
Tech Mahindra
11)
Vodafone M-Pesa
All about
Payment Banks:
Payment Bank is a
step towards financial inclusion.
Recommended by
Nachiket Mor Committee
What is
payment bank?
Payment banks will
have following characteristics:
·
Target audience:
small businessmen and poor people. (=low income households)
·
Potential
candidates to run Payment banks: mobile phone companies, consumer goods
companies, post office system, agri/dairy type cooperatives and Corporate
Business correspondents. Even Scheduled commercial banks can open payment banks
as their subsidiaries.
·
Payment bank will
have to keep CRR (Cash reserve ratio) just like other Scheduled commercial
banks (SBI, PNB, ICICI etc)
·
Payment bank
cannot hold more than Rs.50,000 per customer. (This is similar to PPI [Pre-Paid
Instrument Providers])
·
Payment bank
cannot involve in any credit risk. (again similar to PPI)
·
Payment bank will
enjoy all the rights and responsibilities of a Scheduled commercial banks (SCB-
like SBI, PNB, ICICI)
·
Entry capital
requirement will be Rs.50 crore.
·
Payment bank
cannot assume credit risk (meaning they cannot give out loans)
·
Since they cannot
give out loans=> there is no danger of loan default/NPA.
·
Payment bank can
invest money in SLR securities, but they are safe investments, you can easily
recover money.
·
In short, Payment
bank faces near-zero risk of default. so, they don’t need a large capital for
emergency backup.
·
They can accept
demand deposits.
·
Payments bank
will initially be restricted to holding a maximum balance of Rs. 100,000 per
individual customer.
·
Can issue
ATM/debit cards but not credit cards.
Can carry out payments and remittance services
through various channels|
System
|
Can
Give Loans (Credit)?
|
Can
Accept Retail Deposits?
|
Can
Make Payments?
|
|
Payments Network
Operator (like Mastercard, Visa)
|
No
|
No
|
Yes
|
|
Payment Banks
|
No
|
Yes
|
Yes
|
|
Scheduled
Commercial Banks (SBI, ICICI)
|
Yes
|
Yes
|
Yes
|
|
White Label ATM [Click Here]
|
No
|
No
|
Yes
|
·
Capital
requirement: The minimum paid-up equity capital for payments banks is Rs. 100
crore.
·
The payments bank
should have a leverage ratio of not less than 3%, i.e., its outside liabilities
should not exceed 33.33 times its net worth (paid-up capital and reserves).
·
Promoter’s
contribution: The promoter’s minimum initial contribution to the paid-up equity
capital of such payments bank shall at least be 40% for the first five years
from the commencement of its business.
·
Foreign
shareholding: The foreign shareholding in the payments bank would be as per the
Foreign Direct Investment (FDI) policy for private sector banks as amended from
time to time.
Apart from amounts maintained as Cash Reserve
Ratio (CRR) with the Reserve Bank on its outside demand and time liabilities,
it will be required to invest minimum 75% of its “demand deposit balances” in
Statutory Liquidity Ratio(SLR) eligible Government securities/treasury bills
with maturity up to one year and hold maximum 25% in current and time/fixed
deposits with other scheduled commercial banks for operational purposes and
liquidity management
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