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Features of Payments Banks

Features of Payments Banks - All you need to know about payment banks

Features of Payments Banks

We offer online classes for IBPS Clerk, IBPS PO, SBI Clerk, SBI PO and other banking exams crafted by our experienced faculty. We also offer online test series for IBPS / SBI exams keeping in mind the latest exam pattern. Our motive behind these articles is to provide information that will be help you in cracking any banking exam.In this article, the topic ’Payments Bank’ from Banking section is explained.

 

Payments Bank

Payments Bank is a new model of banks proposed by the Reserve Bank of India (RBI).A payments bank is akin to any other bank, but operating on a smaller scale without involving any type of credit risk. In other words, it can carry in its own most banking operations but cannot provide loans or issue credit cards. Payments bank can accept demand deposits (up to ₹1 lakh), can offer remittance services, mobile payments/purchases/transfers/ and can provide other banking services like ATM/debit cards, net banking and third party fund transfers.

 

History:

In September 2013, the Reserve Bank of India formed a committee headed by Dr Nachiket Mor to go through ‘Comprehensive financial services for small businesses and low-income households’. The main aim of the committee was to suggest measures to achieve financial inclusion and increased access to financial services.

The committee submitted the report to RBI in January 2014. One of the main suggestions of the committee was to introduce specialised banks or ‘payments bank‘ to cater to the needs oflower income groups and small businesses.On 19 August 2015, the Reserve Bank of India gave “in-principle” approval to eleven entities to launch payments banks in India.

Some Important Facts:

  • Airtel has launched India’s first payments bank.
  • Paytm is the second such payments bank to be launched in the country.
  • India Post Payments Bank is the third such entity to receive payments bank approval after Bharti Airtel and Paytm.
  • Aditya Birla group received payments bank permit on 3 March 2017.

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Regulations:

  • The minimum capital required to open payments bank is 100 crore.
  • The bank must use the word “payments bank” in its name to differentiate it from other types of bank.
  • For the first five years, the stake of the promoter will remain at least 40%.
  • 25% of any payments bank branches must be in the unbanked rural area.
  • Initially, the deposits made by the customer will be capped at 100,000 per customer, but it can be raised by the RBI based on the performance of the bank.
  • Foreign shareholding will be allowed in payments banks as per the rules of FDI in private sector banks in India.
  • The banks will be given in-principle approval 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.
  • The majority of the bank’s board of directors will consist of independent directors, who are appointed according to the RBI guidelines.
  • The voting rights will be regulated according to the Banking Regulation Act, 1949. The voting rights of any shareholder is capped at 10%, which could be raised to 26% by the RBI.
  • Any acquisition of more than 5% in it will require approval from the RBI.
  • The payments bank should be fully networked from the beginning itself.
  • The bank is empowered to accept utility bills.
  • Payments bank licensees cannot form subsidiaries to undertake non-banking activities.

Conclusion:

The main objective of payments bank is to increase the network of payment and financial services to small business, low-income households, labour workforce in secured technology-driven environment. With payments banks, RBI is looking to increase the penetration level of financial services to the remote areas of our country.

 

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