Payment Banks in India

  1. Payment Banks have been set up by Reserve Bank of India based on the recommendations of “Comprehensive Financial Services for Small Businesses and Low-Income Households” headed by Dr. Nachiket Mor towards intensifying financial inclusion by i) opening small savings accounts ii? payment/remittance services to migrant labor workforce, low-income households, small businesses, and other unorganized sector entities and other users. They offer other services like remittances, issue ATM/Debit cards, third party transfers, etc.
  2. They are also aimed to promote Digital and Cashless banking in our country. They are operating on a smaller scale i.e they can accept demand deposits (Savings account and Current account) from customer and at the end of the day the balance should not exceed Rs.1.00 Lakhs per individual customer. However, payment banks can make arrangements with any other scheduled commercial bank for amounts in excess of the prescribed limits i.e.Rs.1.00 Lakh, to be swept into an account opened for the customer at that bank.
  3. Payment Banks cannot carry out lending activities and issue credit cards to any person including their directors. However, They can lend to their own employees out of the bank’s own funds as per Board approved the policy.
  4. Payment Banks demand deposits accounts can hold a maximum balance of Rs.1.00 Lakhs per individual customers. Further, they can not accept time deposits i.e. fixed deposits and Recurring deposits also no NRI deposits shall be accepted by payment banks.
  5. Without lending, how the payment banks can deploy funds?. Apart from maintaining CRR with RBI, Payment banks can deploy a maximum 25% of its funds in Current/ Fixed Deposits with other scheduled commercial banks for operational purposes and liquidity management. Remaining 75% of its demand deposit balances should be invested in Statutory Liquidity Ratio (SLR) eligible government securities with maturity up to one year. Payment banks can participate in the call money, CBLO markets as a lender as well as borrower.
  6. The minimum paid up equity capital for payment banks shall be Rs.100.00 Crore. The promoter shall contribute a minimum of 40% of its paid-up equity capital for the first five years from the commencement of business.
  7. The payment banks should have a leverage ratio of not less than 3%. i.e. its total outside liabilities should not exceed 33.33% of its net worth(Paid up capital and reserves).
  8. Payment Banks can offer ATM services, Mobile Banking, Internet Banking, Business Correspondents (BC). Payment Banks can send or receive remittances through RBI approved payment mechanisms i.e. RTGS/NEFT/IMPS/UPI.
  9. Payment banks shall undertake distribution of mutual funds units, insurance products, pension products with prior approval of RBI and after complying with requirements of respective regulators for such products.
  10. The board of payments banks should have the majority of independent directors. The minimum capital requirement is 15%
  11. While about 41 entities had applied for payment Banks license in 2014, only 11 got the license.
    1. Aditya Birla Nuvo Limited
    2. Airtel M Commerce Services Ltd
    3. Cholamandalam Distribution Services Ltd
    4. India Post
    5. Fino Paytech Ltd
    6. NSDL
    7. Reliance Industries Ltd
    8. Shri Dilip shantilal shanghvi
    9. Shri Vijay shekar Sharma (PAYTM)
    10. Tech Mahindra Ltd
    11. Vodafone m-pesa Ltd

The following is the list of active banks

1. Idea Payment Bank
2. Airtel Payment Bank
3. India Post Payment Bank
4. Fino Payment Bank
5. NSDL Payment Bank
6. Jio Payments Bank
7. Paytm Payment Bank

Cholamandalam Distribution services, Tech Mahindra, Sun Pharma (Dilip shantilal Shanghvi) have surrendered their licenses. Vodafone may not start payment bank since it is already holding stake in the Idea Payment Bank through Idea – vodafone amalgamation.

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