Operation and Criteria for Payment Banks

Operation and Criteria for Payment Banks

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By providing small savings accounts and payments/remittance services to migrant labor workforce, low-income households, small businesses, and other users, the establishment of payments banks will further financial inclusion. They won't lend to customers and will have to put their money into bank deposits and government papers. The Payment Banks are able to:

• Sell mutual funds, insurance, pensions, and internet banking.

• Have ATMs and business correspondents.

• Provide customers with a bill payment service

• Facilitate mobile phone-based transfers and remittances

• They are able to provide travelers with forex cards that can be used as debit or ATM cards throughout India at prices that are lower than those offered by banks.

• They can also provide third parties with a card acceptance mechanism, such as "Apple Pay."

However, Payment Banks are unableto:

• Provide credit cards

• Provide loans

• Accept deposits from non-residents of the United States

• Accept demand deposits—Payments Bank will initially be limited to holding a maximum balance of Rs. 100,000 for each individual client.

• Payments Banks are unable to issue credit cards.

• Issuance of ATM/debit cards

• Services for sending and receiving money through a variety of means.

• Other Bank's Business Correspondents (BC), subject to the Reserve Bank's BC guidelines.

• Distribution of straightforward financial products that do not involve risk sharing, such as insurance policies and mutual fund units.

• The payments bank is not allowed to lend money.

Requirements to establish a Payments Bank

• Existing non-bank PPI issuers are one of the requirements for setting up payment banks. and other things, like people or professionals; Mobile phone companies, non-banking finance companies (NBFCs), corporate Business Correspondents (BCs), supermarket chains, and real sector cooperatives; that the residents own and control; and entities from the public sector may apply to establish payments banks.

• In order to be eligible to promote payments banks, promoter/promoter groups must be "fit and proper" and have a solid track record of professional experience or have operated their businesses for at least five years.

• Small finance banks must have a minimum equity capital of Rs. 100 crore.

• Keeps at least 75% of its deposits in government bonds and no more than 25% in other scheduled commercial banks.

• For the first five years following the bank's launch, the promoter must make a minimum initial contribution equal to 40% of the paid-up equity capital.

• To deal with complaints from customers, the bank ought to have a powerful Customer Grievances Cell.

The Bank's operations should be completely networked and driven by technology from the beginning, adhering to generally accepted standards and guidelines.