Payment Banks
Payment Banks are setup with objective of financial inclusion by providing
1.Small savings accounts
2. Payments remittance services
to its users.
Targeted user group of Payment banks are
1.Migrant labour workforce
2.Low income households
3.Small businesses
4.Other unorganized sector entities
Activities that can be performed by Payment banks are
1.Acceptance of demand deposits.Initially there will be restriction to hold balance not more than Rs. 100,000 per individual customer.
2.Issuance of ATM/debit cards. Payments banks, however, cannot issue credit cards.
3.Payments and remittance services through various channels eg mobile phone.
4.They can provide forex card and provide forex services at lower charges than banks.
5.They can transfer money directly to bank accounts at nearly no cost being a part of the gateway that connects banks.
6.They can also offer card acceptance mechanisms to third parties such as the ‘Apple Pay.’
7.Distribution of non-risk sharing simple financial products like mutual fund units and insurance products, etc
Reserve Bank granted in-principle approval to following 11 applicants to be a payment bank
- Aditya Birla Nuvo Ltd
- Airtel M Commerce Services Ltd
- Cholamandalam Distribution Services Ltd
- Department of Posts
- Fino PayTech Ltd
- National Securities Depository Ltd
- Reliance Industries Ltd
- Dilip Shantilal Shanghvi
- Vijay Shekhar Sharma
- Tech Mahindra Ltd
- Vodafone m-pesa Ltd
Important Points to note
- The minimum paid-up equity capital for payments banks shall be Rs. 100 crore.
- The payments bank cannot undertake lending activities.
- Apart from amounts maintained as Cash Reserve Ratio (CRR) with the Reserve Banks, it will be required to invest minimum 75 per cent 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 per cent in current and time/fixed deposits with other scheduled commercial banks for operational purposes and liquidity management.
This can be considered as a step to redefine banking in India.This is the first time RBI has given differentiated license for specific activities.This move is to achieve financial inclusion and provide banking services to financially backward section of society.It hopes payments banks will enable poorer citizens who used to transact only via cash to take their first step into formal banking. It could be uneconomical for traditional banks to open their branches in every village of India but the mobile phones coverage is a promising low-cost platform for quickly taking basic banking services to every rural citizen. This will also help in moving towards India’s journey into a cashless economy.A lot of people including migrant can shift to mobile payment transfer platform which will boost India’s domestic remittance market as well. Payment banks can also play a crucial role in implementing the government’s direct benefit transfer scheme, where subsidies on healthcare, education and gas are paid directly to beneficiaries’ accounts.
Thus Payment banks are a welcome and much thought of step to achieve financial inclusion in country.
