A payment bank is a new model of banks conceptualized by the Reserve Bank of India (RBI). Payment banks can accept a restricted deposit, which is currently limited to 1 lakh per customer and may be increased further. Loans and credit cards can’t be issued by this type of bank. Current accounts and savings accounts can be operated by such banks. These banks can issue services like ATM cards, debit cards, net banking, and mobile banking. The payments bank will be required to use the words “Payments Bank” in its name in order to differentiate it from other banks.
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Bharti Airtel set up India's first live payments bank.
The payments bank will be registered as a public limited company under the Companies Act, 2013, and licensed under Section 22 of the Banking Regulation Act, 1949, with specific licensing provisions restricting its activities mainly to acceptance of demand deposits and provision of payments and remittance services. These type of banks will be governed by the provisions of the Banking Regulation Act, 1949; Reserve Bank of India Act, 1934; Foreign Exchange Management Act, 1999; Payment and Settlement Systems Act, 2007 and other Guidelines/Instructions issued by RBI and other regulators from time to time. These banks will be given scheduled bank status once it commences operations, and is found suitable as per Section 42 (6) (a) of the Reserve Bank of India Act, 1934.
Functions of Payment Bank
- Accept deposits from the public, which are currently limited to ₹ 1 lakh per customer and may be increased further. No NRI deposit will be accepted.
- Payment banks can issue debit card/ATM cards. But can’t issue a credit card.
- Payment banks can do payment and remittance services through various channels including branches, ATMs, business correspondents, and mobile banking.
- May function as a business correspondent of another bank.
- Payment bank can take utility bill payments etc
Deployment of funds
- The payments bank cannot undertake lending activities.
- Except from amounts maintained as Cash Reserve Ratio (CRR) with the Reserve Bank on its outside demand and time liabilities, it will be required to invest a minimum of 75 percent 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 percent in current and time/fixed deposits with other scheduled commercial banks for operational purposes and liquidity management.
- The minimum paid-up equity capital for payments banks shall be Rs. 100 crore.
- Payments bank should have a leverage ratio of not less than 3 percent, i.e., its outside liabilities should not exceed 33.33 times its net worth (paid-up capital and reserves).
- The promoter's minimum initial contribution to the paid-up equity capital of such payments bank shall at least be 40 percent for the first five years from the commencement of its business.
- These banks should have a high-powered Customer Grievances Cell to handle customer complaints.
Procedure for application
According to Rule 11 of the Banking Regulation (Companies) Rules, 1949, applications shall be submitted in the prescribed form (Form III) to the Chief General Manager, Department of Banking Regulation, Reserve Bank of India, in addition, the applicants should furnish the business plan and other requisite information as indicated.
Additional information to be furnished:
Information on the individual promoter
Information on the entity promoting the bank
Detail information on the individuals and entities in the promoter group
The applicants should furnish detailed information about the persons/entities, who would subscribe to 5 percent or more of the paid-up equity capital (shareholding pattern) of the 10 proposed banks, inclusive of foreign equity participation, in the proposed bank and the sources of capital of the proposed investors.
- Project Report
- Any other information
This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not corpseed, and have not been evaluated by corpseed for accuracy, completeness, or changes in the law.
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