What is payment banks?
Payment Banksare to be registered as public limited companies under the Companies Act, 2013 and are to be licensed under Sec 22 of the Banking Regulation Act, 1949. PBs are to be given the status of scheduled banks under the section 42 (6) (a) of the Reserve Bank of India Act, 1934. However, the words “Payments Bank” have to be used by the companies in their name in order to differentiate it from other banks.
They 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; and other relevant Statutes and directives. The guidelines will be reviewed by the RBI regularly. RBI’s main aim to push for payments bank is to serve the need of different banking activities in the rural areas. This has both micro and macroeconomic benefits and serves the general public at large.
RBI on 23rd September 2013 constituted a committee on Comprehensive Financial Services for Small businesses and Low-Income Households that was headed by Nachiket Mor. The committee submitted its report on 7th January 2014 and also recommended the formation of a new category (Payment Banks) among its other recommendations.
Draft guidelines for the license of Payment Banks and their list were released by RBI in February 2015. The license applications were evaluated by External Advisory Committee headed by Nachiket Mor who submitted its report on 6th July 2015 after examining the financial track record as well as governance issue on applicant entities.
On 19th August 2015, RBI gave the in-principle license to 11 entities to launch Payment Banks. The In-Principle License is valid for a period of 18 months and the concerned entities are required to fulfil entities are required to fulfil all the requirements within this period. They are not allowed to engage in Banking activities in this period. After the fulfilment of all the conditions which are required to set up a Payment Bank, RBI will grant licenses under S. 22 of the BR Act, 1949.
Conditions for Payments BanksPayments banks may convert to a small finance bank after 5 years of business
The RBI also raised the minimum paid-up capital requirement for SFBs from 100 crore to 200 crore.