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With RBI announcement of 11 payment bank on 19.08.2015 here is what we should know about these banks:

WHAT IS PAYMENT BANKS?

A payments bank is a type of non-full service niche bank in India. A bank licensed as a payments bank can only receive deposits and provide remittances. It cannot carry out lending activities. This type of bank was created to help India reach its financial inclusion targets. This type of bank is targeted at migrant labourers, low income households, small businesses, and other unorganised sector entities.

HISTORY OF PAYMENT BANKS

On 23 September 2013, Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, headed by Nachiket Mor, was formed by the RBI. On 7 January 2014, the Nachiket Mor committee submitted its final report. Among its various recommendations, it recommended the formation of the panel recommended the formation of new category of bank called payments bank.

On 17 July 2014, the RBI released the draft guidelines for payment banks, seeking comments for interested entities and the general public. On 27 November, RBI released the final guidelines for payment banks.

On February 2015, RBI released the list of entities which had applied for a payments bank license. There were 41 applicants. It was also announced that an external advisory committee headed by Nachiket Mor will evaluate the license applications. On 28 February 2015, during the presentation of the Budget it was announced that India Post will use its large network to run a payments bank. On August 19, 2015 The Reserve Bank of India gave an in-principle nod to eleven entities to launch a payments bank—the first set of differentiated bank licences to be issued by the regulator

CAPITAL STRUCTURE OF PAYMENT BANKS

The minimum capital requirement is Rs.100 crore. For the first five years, the stake of the promoter should be 40% minimum. Foreign share holding will allowed in these banks as per the rules for FDI in private banks in India. The voting rights will be regulated by the Banking Regulation Act, 1949. The voting right of any shareholder is capped at 10%, which can be raised to 26% by Reserve Bank of India (RBI). Any acquisition of over than 5% will require approval of the RBI. The majority of the bank's board of director should consist of independent directors, appointed according to RBI guidelines.

PROPOSED ACTIVITIES OF PAYMENT BANKS

The bank should be fully networked from the beginning. The bank can accept utility bills. It cannot form subsidiaries to undertake non-banking activities. Initially, the deposits will be capped at Rs.100,000 per customer, but it may be raised by the RBI based on the performance of the bank. The bank cannot undertake lending activities. 25% of its branches must be in the unbanked rural area. The bank must use the term "payments bank" in its to differentiate it from other types of bank. The banks will be licensed as payments banks under Section 22 of the Banking Regulation Act, 1949 and will be registered as public limited company under the Companies Act, 2013.

NAME OF 11 PAYMENT BANKS ARE :

The eleven companies include :

1. Reliance Industries Ltd,
2. Aditya Birla Nuvo Ltd,
3. Airtel M Commerce Services Ltd,
4. Vodafone m-pesa Ltd
5. Tech Mahindra Ltd.
6. Dilip Shanghvi
7. Fino PayTech limited
8. National securities depository limited
9. Vijay Shankar Sharma
11. Cholamandalam Distribution Services Ltd.

FUTURE OF PAYMENT BANKS :

With the country advancing towards digital India this type of payment solution are in much need of industry. This will help ecommerce industry to flourish apart from other sectors. This will further encourage cashless transactions across many segments. With increase in transaction we may expect increase in functions of these payment banks according to need of time and industry.

Source : Wikipedia.

Regards
CA CS JAINENDRA KUMAR JAIN
ADISHREE BUSINESS SOLUTIONS
EMAIL - jainedra1234@gmail.com/adishreebusinesssolutions@gmail.com

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