Payments bank

Payments banks are a new model of banks conceptualised by the Reserve Bank of India (RBI). These banks can accept a restricted deposit which is currently limited to INR 1 lakh per customer account. These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks. Payments banks can issue services like ATM cards, debit cards online banking and mobile banking. Airtel has launched India's first live payments bank.

Regulations

The minimum capital requirement is ₹100 crore. For the first five years, the stake of the promoter should be 40% minimum. Foreign share holding will be allowed in these banks as per the rules for FDI in private banks in India. The voting rights will be regulated by the Banking Regulation Act, 1949. The voting right of any shareholder is capped at 10%, which can be raised to 26% by Reserve Bank of India. Any acquisition of more than 5% will require approval of the RBI. The majority of the bank's board of directors should consist of independent directors, appointed according to RBI guidelines.[1]

The bank should be fully networked from the beginning. The bank can accept utility bills. It cannot form subsidiaries to undertake non-banking activities. Initially, the deposits will be capped at ₹100,000 per customer, but it may be raised by the RBI based on the performance of the bank. The bank cannot undertake lending activities. 25% of its branches must be in the unbanked rural area. The bank must use the term "payments bank" in its to differentiate it from other types of bank. The banks will be licensed as payments banks under Section 22 of the Banking Regulation Act, 1949 and will be registered as public limited company under the Companies Act, 2013.[1]

History

On 23 September 2013, Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, headed by Nachiket Mor, was formed by the RBI.[2] On 7 January 2014, the Nachiket Mor committee submitted its final report.[3] Among its various recommendations, it recommended the formation of a new category of bank called payments bank.[4] On 17 July 2014, the RBI released the draft guidelines for payment banks, seeking comments for interested entities and the general public.[5] On 27 November, RBI released the final guidelines for payment banks.[6]

In February 2015, RBI released the list of entities which had applied for a payments bank licence. There were 41 applicants.[7] It was also announced that an external advisory committee (EAC) headed by Nachiket Mor would evaluate the licence applications.[8] On 28 February 2015, during the presentation of the Budget it was announced that India Post will use its large network to run payments bank.[9] The external advisory committee headed by Nachiket Mor submitted its findings on 6 July 2015. The applicant entities were examined for their financial track record and governance issues.[10] On 19 August 2015, the Reserve Bank of India gave "in-principle" licences to eleven entities to launch payments banks:[10][11]

  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

Out of these, three have surrendered their licenses. First one being "Chalomandalam Distribution Services", then "Dilip Shanghvi, Sun Pharmaceuticals" and the latest, "Tech Mahindra".

The "in-principle" license is valid for 18 months within which the entities must fulfill the requirements. 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.[10]

See also

References

Further reading

The first payments bank in the country has gone live. Airtel Payments Bank+ , which has rolled out a pilot project in Rajasthan, launched with the promise of being a disruptor, offering 7.25% interest on savings bank accounts. This is the highest return offered by a bank in India, with most lenders giving only 4%. Airtel, which was earlier offering a wallet — Airtel Money — was the first to receive a payments bank licence from the Reserve Bank of India+ . After receiving the approval, Airtel entered into a pact with Kotak Bank, which agreed to acquire a 20% stake in the bank. Shashi Arora, MD and CEO of Airtel Payments Bank, said, "With this pilot, we have taken a big step towards the launch of our banking services and will be testing our operational readiness for full-scale launch across India."

The bank's focus is on financial inclusion and it will not be issuing ATM or debit cards, but will allow cash withdrawal facilities at designated Airtel retail outlets which will double as banking points. The bank is also providing a free personal accident cover of Rs 1 lakh with every savings bank account. Payments banks are the brainchild of former RBI governor Raghuram Rajan, who came up with the idea of differentiated bank licences.

Airtel Payments Bank plans to open accounts by leveraging the telecom operator's extensive national distribution network of over 1.5 million retail outlets, including in rural areas. A statement issued by the bank said that those in towns and villages across Rajasthan can now open bank accounts at Airtel retail outlets. A unique feature about the bank is that customers with an Airtel mobile connection will have the mobile number as an account number. The bank will be fully digital and paperless, with even account opening being done using Aadhaar-based eKYC. Besides offering banking services through a mobile app, Airtel Bank's services can be accessed by dialling *400#; or through an interactive voice response system by dialling 400. Both the USSD & IVR options are available in Hindi and English languages and work on feature phones.

This article is issued from Wikipedia - version of the 12/2/2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.