Payment bank is an innovative banking model of the Reserve Bank of India. It is started in India in 2017 with the establishment of the Airtel Payments Bank. However, the minimum paid-up equity capital of the payments bank shall be Rs. 100 crore. Accordingly, the payments bank shall be required to maintain a minimum capital adequacy ratio of 15 percent of its risk weighted assets (RWA) on a continuous basis, subject to any higher percentage as may be prescribed by RBI from time to time. Thus, tier I capital should be at least 7.5 percent of RWAs. However, the payment banks are not full fledged banks. Thus, such payment banks are able to accept restricted deposits and facilitate payment and transfer of money electronically. Again, it cannot extend loans or credit cards to the customers.
The primary objective of setting up of payments banks will be to further financial inclusion by providing
(i) small savings accounts and
(ii) payments / remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users, by enabling high volume-low value transactions in deposits and payments / remittance services in a secured technology-driven environment.
For instance, some of the payment banks operating India are-
- Airtel payment bank.
- India Post payment bank.
- Fino payment bank
- Jio payment bank
- Paytm payment bank
- NSDL payment bank etc.
Guidelines of RBI
- It registers under the Companies Act, 2013 as a public limited company.
- Section 22 of the Banking Regulation act, 1949 provides licenses for acceptance of deposits and payment and remittance services.
- Additionally, Reserve Bank of India Act, 1934; Foreign Exchange Management Act, 1999; Payment and Settlement Systems Act, 2007; Deposit Insurance and Credit Guarantee Corporation Act, 1961; other relevant Statutes and Directives, Prudential Regulations and other Guidelines/Instructions issued by RBI and other regulators from time to time regulates the activities of payment bank.
- Different eligible promoters of payment bank are-
- individuals / professionals
- Non-Banking Finance Companies (NBFCs)
- Corporate BCs
- Mobile telephone companies
- Supermarket chains
- Companies
- Real sector cooperatives
Functions
- It accepts demand deposits under current deposits, and savings bank deposits from individuals, small businesses and other entities.
- It issues ATM / Debit Cards. Payments banks, however, cannot issue credit cards.
- It makes payments and remittance services through various channels including branches, Automated Teller Machines (ATMs), Business Correspondents (BCs) and mobile banking.
- This system also provides internet banking services to the users.
- Such bank accepts remittances to be sent to or receive remittances from multiple banks under a payment mechanism approved by RBI, such as RTGS / NEFT / IMPS.
- It undertakes other non-risk sharing simple financial services activities, not requiring any commitment of its own funds, such as distribution of mutual fund units, insurance products, pension products, etc. with the prior approval of the RBI and after complying with the requirements of the sectoral regulator for such products.