The Reserve Bank of India today gave an in-principle nod to 11 entities for setting up payments banks. The entities include Department of Posts, Cholamandalam Distribution Services, Tech Mahindra, National Securities Depository Limited (NSDL), Fino PayTech, Sun Pharma s Dilip Shantilal Shanghvi and PayTM s Vijay Shekhar Sharma. But what is a payments bank and how does it differ from a regular bank? Also Read - RBI cancels Vodafone m-pesa's certificate of authorizationAlso Read - NEFT system now available 24x7 from today; Everything you need to know
In the Union Budget for 2014-15, the Finance minister had announced plans to put into place a structure for differentiated banks that serve certain niche interests, local area banks, payment banks among others to meet credit and remittance needs of small businesses, unorganized sector, low income households, farmers and migrant work force. Also Read - NEFT system will be available 24x7 from December 16: RBI
The RBI then floated draft guidelines for setting licensing these banks in July 2014. It was followed by releasing the final guidelines in November and invited applications for licenses. In February 2015, RBI released the names of applicants and today it announced the list of entities that have been given an in-principle nod for license providing they meet the set criteria in the next 18 months.
A payments bank is different from a regular bank. Here are the activities a payments bank can and cannot do.
1. Like a regular bank, a payments bank too can accept deposits. However, at the moment, a payments bank is restricted to hold a maximum deposit of Rs 100,000 per customer.
2. A payments bank can offer both current and savings accounts.
3. It can also issue ATM and debit cards. However, it cannot issue a credit card.
4. It cannot accept NRI deposits.
5. It can offer payments and remittance services via ATMs, business correspondents and mobile banking. Cash out facility can also be provided at point of sale terminals.
6. A payments bank cannot provide lending services.
7. A payments bank can receive or send remittances from multiple banks via RTGS / NEFT / IMPS payment mechanism.
8. A payments bank can offer simple financial instruments like mutual funds and insurance.