About Payments Bank Licence in India www.deekpay.com

India Payments Bank Licence

In Indian banking circles, the most popular word is "payment bank" Payments banks are seen as having the potential to provide impetus to the Government of India's goal of financial inclusion. Apart from lending and issuing credit cards, the Reserve Bank of India facilitates transactions in these banks like a regular bank. Payment banks bring more flexibility and convenience and simplify the life of banks. They also offer a wide range of services to consumers through a secure digital platform.

In order to open a payments bank, a payments bank licence is required. The Reserve Bank of India issues payment bank licences under section 22 of the Banking Regulation Act, 1949.

What is a payment bank?

In 2013, the Reserve Bank of India (RBI) introduced the concept of a specialised banking model, the Payments Bank. Similar to the services offered by other banks, Payments Bank offers a range of financial services, excluding loans and credit cards.

The Reserve Bank of India grants licences to organisations engaged in the business of banking. These banks perform functions similar to those defined and described in sections 5(b) and 6(1)(a) to (o) of the Banking Regulation Act.

The main objective of introducing such banks is to increase the reach of payment facilities to low-income groups and to support small businesses. The Reserve Bank of India wanted to increase financial penetration into remote areas through payment banks. The first payments bank to be established in India was Bharti Airtel. setting up a payments bank business model requires obtaining a copy of thePayments bank licence".

What are the capital requirements to get a payment bank licence in India is?

Payment banks are not exposed to any significant credit or market risk. However, they are exposed to operational risk. Payment banks must also invest in technology infrastructure for their operations.

Payments Bank of IndiaThe minimum paid-up share capital must be Rs 100 crore. Payments banks must maintain a minimum capital adequacy ratio of 151 TP3T for their risk-weighted assets (RWAs), subject to adjustment for such higher percentage as may be prescribed by the Reserve Bank of India from time to time. Tier 1 capital must be at least 7.51 TP3T of rwa. Tier 2 capital must not exceed 1001 TP3T of total Tier 1 capital. However, payment banks are not required to deal with complex products and the capital adequacy ratio will be calculated according to the Basel Committee's standardised approach.

What is the procedure required to apply for a Payments Bank Licence in India?

The application process for a Payment Bank Licence is as follows.

Payment banks must be registered as public limited companies under the Companies Act 2013. Payment banks should be licensed under section 22 of the Banking Regulation Act 1949. Any company incorporated in India and desirous of carrying on the business of banking should apply for a Payments Bank Licence in Form III as per the provisions of Rule 11 of the Banking Regulation (Companies) Rules, 1949. The application should be sent to the General Manager, Department of Banking Regulation, Reserve Bank of India. The Reserve Bank of India will conduct an initial screening to check the initial eligibility and if required, they will apply additional criteria. An External Advisory Committee (EAC) comprising professionals such as chartered accountants, finance professionals, bankers, etc. will evaluate the applications. The EAC may hold discussions with the applicants as required. The decision to grant in-principle approval will be taken by the Reserve Bank of India and will remain final. The approval in principle will be valid for a period of 18 months, which means that the bank will have to be set up within the stipulated period. The Reserve Bank of India can impose additional conditions and can withdraw the approval in principle if unfavourable features are found.

Who are the eligible promoters to get a payments bank licence?

The following organisations are eligible for a payments bank licence.

What is the scope of activities after obtaining a payment bank licence?

Upon obtaining a licence, the payment bank will be allowed to set up its own outlets such as branches, automated teller machines (atm) and business correspondents (bc) and engage only in limited activities permitted under the Banking Regulation Act, 1949, as described below.

Acceptance of deposits, i.e., demand deposits and savings bank deposits from individuals, small businesses and other permitted entities. Payment banks will have to perform their own KYC/AML/CFT operations like any other bank. Payment banks can issue ATM/debit cards but not credit cards. Payment and remittance services are provided through various channels including branches, ATMs, commercial correspondents and mobile banking. Payment or remittance services would include receipt of funds through various channels such as branches and banks at one end and cash disbursement through branches, banks and ATMs at the other end. Issuance of ppi in accordance with the directions issued under the PSS Act from time to time. Internet Banking - The Reserve Bank of India has also allowed payment banks to offer internet banking services. Payment banks can act as a Business Correspondent (BC) of another bank - Payment banks have the option of becoming a Business Correspondent of another bank, subject to Reserve Bank of India guidelines on BCs. Under RBI-approved payment mechanisms (e.g. RTGS/NEFT/IMPS), the Paying Bank can act as a conduit for receiving remittances sent or received from the bank. Payment banks are authorised to carry out cross-border personal payment/current account remittance transactions. All facilities or approvals incidental to the conduct of such foreign exchange transactions shall be activated by the Reserve Bank of India on the basis of an application made to it. Payment banks can also engage in other simple financial services activities that are not risk sharing. They do not require any commitment of their own funds, e.g., distribution of mutual fund units, pension products, insurance products, etc., after obtaining prior approval from the Reserve Bank of India and complying with the requirements of the industry regulators for such products. Payment banks can pay utility bills etc. on behalf of their customers and the public. Payment banks may not establish subsidiaries to engage in non-banking financial service activities. Payment banks are required to use the words "payment bank" in their name to distinguish them from other banks.

What are the key features of licensed payment banks in India?

Payment banks generally differ from traditional banks. Before applying for a payments bank licence, it is important to understand its basic characteristics.

Offering deposits up to Rs. 10 lakhs Banks can accept deposits up to Rs. 10 lakhs. Customers need to adhere to the prescribed limit and no one can exceed this limit at any time. You can choose to pay in full or in part. The Reserve Bank of India has set the prescribed limit to protect the interest of the customers. Virtual Debit Card Services : Another point of view of Payments Bank is that it offers both physical and virtual debit cards. The debit card provides the user with the scope to use all atm machines in the country and abroad. The virtual debit card does not charge any extra fee for withdrawing cash. Moreover, the physical debit card charges only an annual fee. Smooth transactions through online portals: unlike traditional banks, payment banks have simplified the process of earning and receiving money through digital platforms. It also facilitates online services like NEFT, IMPS and many others that transfer money to customers. Viable payment options: no matter where you live, you can pay digitally. Payment banks reduce the need to visit a physical bank to deposit or withdraw cash. Anyone can start an online payment banking business by obtaining a payment bank licence and meeting all the criteria set by the Reserve Bank of India.

Provide details to the Reserve Bank of India for obtaining a payment bank licence

In order to obtain a Payments Bank Licence, the following details must be provided to the Reserve Bank of India.

Initiator's personal data Name of the promoter. Date of Birth. Status of residence. Parents' names. Not in the pot. Branch and bank account details including credit arrangements. Experience of individual promoters. Areas of Expertise. Record of business and financial worth, etc. Promotion of banking unit information Promoter entity shareholder model. Memorandum and Articles of Association. Financial statements of the sponsor entity for the last five years. Income tax returns for the last three years. Promoter Group Personal and Entity Information Names of individuals and entities. Details of shareholdings. Management details. Illustration Organogram. Total assets of the principal. Annual reports for all group entities for the last five years. Details of listing on the Stock Exchange. Not in the pot. Brown. CIN. Bank account and branch details.

What is the foreign shareholding in Indian payment banks?

Foreign shareholding in payment banks will be in accordance with the Foreign Direct Investment (FDI) policy specified for private sector banks, as amended from time to time. Under the current FDI policy, total foreign investment in private sector banks from all sources will be allowed up to a maximum of 74% of the paid-up capital of the bank.

At least TP3T of paid-up capital must be held by Indian residents at all times. In case of Foreign Institutional Investors (FIIs) or Foreign Portfolio Investors (FPIs), the shares held by individual FIIs / FPIs are limited to less than 101 TP3T of the total paid-up capital. The total aggregate limit for all FIIs / FIs / Qualified Foreign Investors (qfi) shall not exceed 241 TP3T of the total paid-up capital, which may be raised to 491 TP3T of the total paid-up capital by the bank concerned through a resolution of its Board of Directors, followed by a special resolution of its head office in this regard.

In the case of nri, the shares held by an individual shall not exceed 51 TP3T of the total amount of paid up capital. it is considered on the basis of repatriation and non-repatriation, and on the basis of repatriation and non-repatriation, the total limit shall not exceed 101 TP3T of the total amount of paid up capital.

However, Non-Resident Indians (NRIs) can hold up to 241 TP3T of the total paid-up capital on both repatriation and non-repatriation basis, provided the banking company passes a special resolution in the General Body.