Payments bank

Payments banks is a new model of

banks conceptualised by the Reserve
Bank of India (RBI). These banks can
accept a restricted deposit, which is
currently limited to ₹1 lakh per customer
and may be increased further. These
banks cannot issue loans and credit
cards. Both current account and savings
accounts can be operated by such banks.
Payments banks can issue services like
ATM cards, debit cards, net-banking and
mobile-banking. Bharti Airtel set up
India's first live payments bank.

History
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.[1] On 7 January
2014, the Nachiket Mor committee
submitted its final report.[2] Among its
various recommendations, it
recommended the formation of a new
category of bank called payments
bank.[3] On 17 July 2014, the RBI released
the draft guidelines for payment banks,
seeking comments for interested entities
and the general public.[4] On 27
November, RBI released the final
guidelines for payment banks.[5]

In February 2015, RBI released the list of

entities which had applied for a
payments bank licence. There were 41
applicants.[6] It was also announced that
an external advisory committee (EAC)
headed by Nachiket Mor would evaluate
the licence applications.[7] On 28
February 2015, during the presentation of
the Budget it was announced that India
Post will use its large network to run
payments bank.[8] The external advisory
committee headed by Nachiket Mor
submitted its findings on 6 July 2015.
The applicant entities were examined for
their financial track record and
governance issues.[9] On 19 August 2015,
the Reserve Bank of India gave "in-
principle" licences to eleven entities to
launch payments banks.[9] The "in-
principle" license was valid for 18
months within which the entities must
fulfil the requirements and they were not
allowed to engage in banking activities
within the period. The RBI will grant full
licenses under Section 22 of the Banking
Regulation Act, 1949, after it is satisfied
that the conditions have been fulfilled.[9]

Regulations
The minimum capital requirement is
₹100 crore. For the first five years, the
stake of the promoter should remain at
least 40%. Foreign share holding will be
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. Any acquisition of
more than 5% will require approval of the
RBI. The majority of the bank's board of
directors should consist of independent
directors, appointed according to RBI
guidelines.[10]
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 ₹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 name
to differentiate it from other types of
bank. The banks will be licensed as
payments banks under Section 23 of the
Banking Regulation Act, 1949, and will be
registered as public limited company
under the Companies Act, 2013.[10]
Banks
On 19 August 2015, the Reserve Bank of
India gave "in-principle" licenses to
eleven entities to launch payments
banks.[11]

1. Aditya Birla Nuvo

2. Airtel M Commerce Services
3. Cholamandalam Distribution Services
4. India Post
5. Fino PayTech
6. National Securities Depository
7. Reliance Industries[12]
8. Vodafone M-Pesa
9. Paytm
10. Tech Mahindra
11. Sun Pharmaceuticals

Bharti Airtel launched India's first live

payments bank in March 2017.[13] Paytm
and India Post have also launched
services. Cholamandalam Distribution
Services, Sun Pharmaceuticals and Tech
Mahindra have surrendered their
licenses.

See also
Regional Rural Bank
Banking in India
Small finance bank

References
1. "RBI appoints Committee on
Comprehensive Financial Services for
Small Businesses and Low-Income
Households" . Reserve Bank of India. 23
September 2013. Archived from the
original on 2 April 2015. Retrieved
2 March 2015.
2. "RBI releases Report of the Committee
on Comprehensive Financial Services for
Small Business and Low Income
Households" . Reserve Bank of India. 7
January 2014. Archived from the original
on 2 April 2015. Retrieved 2 March 2015.
3. "RBI panel suggests new set of banks
for financial inclusion" . Live Mint. 7
January 2014. Retrieved 26 July 2014.
4. "RBI releases Draft Guidelines for
Licensing of Payments Banks and Small
Banks" . Reserve Bank of India. 17 July
2014. Retrieved 2 March 2015.
5. "RBI releases Guidelines for Licensing
of Payments Banks" . Reserve Bank of
India. 27 November 2015. Retrieved
2 March 2015.
6. "RBI releases applicants list of
payment, small bank licence" . The Hindu
Business Line. 4 February 2015. Retrieved
2 March 2015.
7. "Usha Thorat, Nachiket Mor to head RBI
panels for differentiated bank licenses" .
Business Standard. 3 February 2015.
Retrieved 8 March 2015.
8. "Postal dept to use its network for
proposed payment bank" . Hindustan
Times. 28 February 2015. Retrieved
2 March 2015.
9. "Applicants for Payments Banks" .
Reserve Bank of India. 19 August 2015.
Retrieved 20 August 2015.
10. "Guidelines for Licensing of Payments
Banks" . Reserve Bank of India. Retrieved
2 March 2015.
11. "Reliance, Airtel, nine others get RBI
nod to open payments banks" . Live Mint.
20 August 2015. Retrieved 20 August
2015.
12. https://m.businesstoday.in/story/jio-
payments-bank-account-payment-paytm-
airtel-sbi-reliance/1/274064.html
13. "Know Everything about Airtel
Payments Bank" . Bharti Airtel. Retrieved
16 March 2017.

External links
How to apply for Paytm Payments
Bank

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