Payments Bank: All You Need to Know

Mentor for Bank Exam
Payments Bank: All You Need to Know
Dear Aspirants,
Welcome to Mentor for Bank Exams. Here we are sharing all the important information about Payment Banks that you need to about, to crack any Bank interview. Kindly go through the article and comment your doubts or suggest necessary changes (if any).
The need for banks is on the rise as the customer base of every banks increases multiple fold. Yet the unbanked section in India amounts to a bigger number. Even though there are multiple Banks providing banking solutions to the people of our country, the reach of those banks is limited and still there are places where people don’t use banks for their savings and other things.
Formation of Payments Banks:
In 2013, Committee on Comprehensive Financial Services for Small Business and Low Income Households headed by Nachiket Mor, was formed by the RBI. That committee recommended the formation of new category bank called Payments Bank.
In 2015 the RBI gave in-principle licenses to 11 to launch Payments Banks. Out of 11, Three have surrendered their licenses.
The minimum paid-up equity capital for setting up of these banks will be Rs.100 Crore NBFC (Non-Banking Finance Companies), Telecom Companies, Supermarket Chains, Pre- Paid Payment Instrument (PPI) Issuers etc. can apply for Payments Bank license.
These Banks will focus on Payments & Remittances only.
Guidelines for Payments Bank
  • Payments Bank can take deposits only on Current Accounts & Savings Accounts
  • Maximum Balance per Customer is restricted up to 1 Lakh
  • Cannot accept FD’s & RD’s
  • It can issue Debit Card
  • It cannot open NRI Accounts
  • It cannot issue Credit Card
  • It cannot give loans.
  • It can invest depositor’s money in Government Securities only
  • Payments Bank can distribute financial products such as Insurance, Mutual Funds, and Pension Products, accept utility bill payments etc.
  • Liabilities should not exceed 33 times of its net worth
  • Payments banks will be required to invest at least 75%of their demand deposits in Government Securities.
Promoter of the Payments Bank should hold at least 40% of its paid-up equity capital for the first 5 years from the commencement of its business.
Airtel Payments Bank is the first Payments Bank established in India.
Can & Can’t in Payments Bank

List of Payments Bank
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.    Sun Pharmaceuticals
9.    Paytm
10.Tech Mahindra
11.Vodafone M-Pesa
Out of these, three have surrendered their licenses. First one being "Cholamandalam Distribution Services", then "Sun Pharmaceuticals" and the latest, "Tech Mahindra".
The "in-principle" license is valid for 18 months within which the entities must fulfil 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.
India Post Payments Bank – Aapka Bank, Aapke Dwaar
Airtel Payments Bank – Bank Hai Par Alag Hai
Payment Bank and Joint Venture Between:

“The ‘in-principle’ approval granted will be valid for a period of 18 months, during which time the applicants have to comply with the requirements under the guidelines and fulfill the other conditions as may be stipulated by the Reserve Bank”.
The main motive is to give banking solutions to the first time users and also provide them with digital solutions. Since the cost of initiating a new scheduled bank will be high , the payment bank will become a disruptor in that section. This will be a change maker in the industry and this is a bold step in refining the various section in the banking system. Banking will become more prevalent in the rural regions and the unbanked section will become less in the forthcoming days.