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Payment Banks (GS3)

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  • 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 a 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

Guidelines

  • These banks can accept a restricted deposit, which is currently limited to ₹100,000 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 ATM cards or debit cards and provide online or mobile banking.

Regulations

  • The minimum capital requirement is 100 crore.
  • For the first five years, the stake of the promoter should remain at least 40%.
  • Foreign shareholding 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.
  • 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.
  • Payment Banks are not be permitted to lend to any person including their directors. 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 22 of the Banking Regulation Act, 1949, and will be registered as public limited company under the Companies Act, 2013.
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