Background: Nachiket Mor Committee on Comprehensive Financial Services for Small Businesses and Low Income Groups recommended formation of specialized Banks called Payment Banks. The objective behind formation of specialized Banks is to augment financial inclusion in the remote areas, where Banking services remained elusive, to provide small savings/current accounts, payment/remittance services to farmers, migrant work force, low income households, small businesses and other unorganized sector entities by facilitating high volume low value transactions and voluminous small payment/remittance services, thereby ensuring expeditious receipt of payment/remittance.
India has un-banked population, currently, is in excess of 20 crores, and 70% of population reside in rural areas not aware of modern Banking services, even if they have banking accounts. Payment Banks could be financial services gateway to introduce or restructure number of innovative products. Payment Banks could prove to be disruptive if segmentation, use of technology and client base of parentage is optimally utilized.
Out of 41 applicants, RBI granted in-principle approval to 11 applicants but 3 entities withdrew their applications. 4 Payment Banks namely, Airtel, India Post, PayTm and Jio have commenced the operations and rest are in the process of getting final approval from RBI. The minimum capital requirement of Payment Banks is Rs 100 crores, out of which 40% should be held by promoters for at least 5 years. Foreign shareholding pattern of Payment Banks would be as applicable to Private Sector Banks.
Salient Features
* They can’t offer loans/credit cards but can raise demand deposits of up to Rs. 1 lakh, and pay interest on these balances just like a savings bank account does.
* Three-fourths of deposits to be maintained as SLR in Government Securities/Treasury bill with maturity of up to 12 months.
* Payment Banks are permitted to distribute mutual funds and insurance products.
* They can enable transfers and remittances through a mobile phone.
* They can offer services such as automatic payments of bills, and purchases in cashless, chequeless transactions using mobile/debit cards.
* They can issue ATM/debit cards usable on ATM networks of all banks.
* They can transfer money directly to bank accounts at reduced/no cost being a part of the gateway that connects banks.
* They can provide forex cards/services to travellers, usable again as a debit or ATM card all over India.
* They can also offer card acceptance mechanisms to third parties such as the ‘Apple Pay.’
Keep watching this space for interesting updates on banking!
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