Payment Bank license

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PAYMENTS BANK LICENSE

The Reserve Bank of India formed the concept of a specialized bank model in 2013, namely, Payments Bank. Just like other banks, the Payment Bank renders an array of financial services except for facilitating loans and credit cards. The primary objective to introduce such a bank was to broaden the reach of payment facilities to lower-income groups and support small businesses. By innovating Payment Banks, RBI wants to elevate the penetration of finances into the remote areas. The first payment bank that was set up in India is Bharti  Airtel. To establish the business model of Payment Bank, one has to acquire a Payment Bank License.

Registration, licensing and regulations

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 conditions restricting its activities mainly to acceptance of demand deposits and provision of payments and remittance services. It 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; Deposit Insurance and Credit Guarantee Corporation Act, 1961; other relevant Statutes

Eligible applicant for payment bank license

  1. The existing non-bank Pre-paid Payment Instrument (PPI) issuers authorised under the Payment and Settlement Systems Act, 2007 (PSS Act); and other entities such as
  2. Individuals / professionals;
  3. Non-Banking Finance Companies (NBFCs),
  4. Corporate BCs,
  5. Mobile telephone companies,
  6. Super-market chains,
  7. Companies,
  8. Real sector cooperatives; that are owned and controlled by residents; and
  9. Public sector entities may apply to set up payments banks.

List of activity that can be carried by payment banks

  1. Acceptance of demand deposits, i.e., current deposits, and savings bank deposits from individuals, small businesses and other entities, as permitted. No NRI deposits should be accepted.
  2. Issuance of ATM / Debit Cards. Payments banks, however, cannot issue credit cards.
  3. Payments and remittance services
  4. Issuance of PPIs as per instructions issued from time to time under the PSS Act.
  5. Internet banking
  6. Functioning as Business Correspondent (BC) of another bank subject to the RBI guidelines on BCs.
  7. As a channel, the payments bank can accept remittances to be sent to or receive remittances from multiple banks under a payment mechanism approved by RBI, such as RTGS / NEFT / IMPS.
  8. Payments banks will be permitted to handle cross border remittance transactions in the nature of personal payments / remittances on the current account.
  9. Payments banks can undertake other non-risk sharing simple financial services activities, not requiring any commitment of their 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.
  10. Utility bill payments.

Procedure for registration

  1. Applicant should be a public limited company incorporated under companies act, 2013 with minimum paid up capital of 100 crore.
  2. Application for the payment license to the Chief General Manager of RBI in form III along with business plan and required documents.
  3. Thereafter an External Advisory Committee (EAC) will evaluate the application and the names of successful applicants will also be placed on the RBI website.
  4. The validity of the in-principle approval issued by RBI will be eighteen months from the date of granting such in-principle approval and would thereafter lapse automatically. Therefore, the bank will have to be set up within eighteen months of grant of in-principle approval.
  5. 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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