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Payment Bank License

The concept of Payment Bank is introduced by the Reserve Bank of India (RBI). The maximum deposit amount to these banks is currently limited to INR 1 lakh for each customer, though there are chances that this amount will be expanded further. Payment Bank operates both the current as well savings account. Those banks who have payment bank license can also offer services like debit cards, internet, mobile banking and furthermore ATM cards.

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  • Application Drafting
  • Application Filing
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Overview of Payment Bank License

The concept of Payment Bank is introduced by the Reserve Bank of India (RBI). The maximum deposit amount to these banks is currently limited to INR 1 lakh for each customer, though there are chances that this amount will be expanded further. Payment Bank operates both the current as well savings account. Those banks who have payment bank license can also offer services like debit cards, internet, mobile banking and furthermore ATM cards. Payment Bank otherwise called separated Bank will be allowed to set up outlets (branches), ATMs, business correspondents, and so on however would be confined to perform activities allowed to such Bank under the Banking Regulation Act, 1949. Payment Bank can have minimum paid up capital of Rs100 crore.

Purpose of Payment Bank License

The sole goal of the RBI to create a concept regarding the Payment Bank to broaden the scope of financial administrations. The target audience of the Payment Banks remains the low-salary people and transient work from the initial phase of its establishment. RBI plans to concede a protective and innovation driven budgetary framework with Payments Banks. It is for the most part infiltrates monetary help to the denied and rustic division of India.

Acts governed under payment Bank

  • Companies Act, 2013
  • Banking Regulation Act, 1949
  • Reserve Bank of India, 1934
  • Foreign Exchange Management Act, 1999
  • Payment and Settlement System Act, 2007
  • Deposit Insurance and Credit Guarantee Corporation Act, 1961

Primary Objective of Payment Bank

  • Small Savings Account

    Payment/settlement administrations to work workforce, low pay family units, unorganized sectors, private ventures, high volume low worth exchanges and so forth.

  • Eligible Players

    1. Already keep going non-bank prepaid payment instrument that falls under the Payment and Settlement System Act, 2007

    2. Professional or Individuals

    3. NBFCs

    4. Business correspondent

    5. Mobile operating companies

    6. Supermarket chains

    7. Public companies

    8. Public sector elements

Payment Bank License

Benefits of Payment Bank License

It is basic to realize that payment banks are an alternate part of banks. In spite of the fact that they can't give loaning and credit facilities; there are numerous benefits of Payments Bank license system, which are as per the following:

  • Deposit Limit of 1 Lakh

    The essential property of the payment bank is that it provides a deposit of 1 lakh for each client in particular. No one holds the position to surpass as far as possible. The Reserve Bank of India has confined it considering the new idea of Payments Banks and to protect the interest of the clients.

  • No Need to Maintain A Minimum Account Balance

    The nature of Payment Bank is a lot different from conventional banks; these banks don’t bother their customers with the minimum account balance norm. The clients can pick zero parity accounts; though, in case of Airtel Payment Bank, customers have to give a first-time deposit of ₹100.

  • Operate Savings and Current Account

    By acquiring a Payment Bank license, one can provide the facility if both the savings account and current account. The previous will assist clients with attaining quarterly intrigue while, through current account, no individual can increase any intrigue. It is solely for the benefit of merchants. Payment Bank give a standard sparing record to every one of its clients which further gets partitioned into various levels, in view of client's account balance.

  • Virtual as well as Physical Debit Card

    Aside from giving physical debit cards, the Payment Banks additionally channelizes virtual debit card transaction. Since debit cards empower money withdrawal from ATMs over the world, it is an achievable method of making payment. Moreover, the Payments Banks has strengthened the utilization of debit cards through virtual debit. The virtual debit doesn't request extra charges, though the clients need to pay a yearly expense for utilizing physical debit cards.

  • Online Fund Transfer

    As the Payments Bank works on a digital platform; they render a variety of online fund transfer services. Its clients can access to a few online administrations, for example, NEFT, IMPS, and so forth. Besides, computerized transactions kill the issue to visit a budgetary organization, and one can conduct different transactions via telephone.

Payment Bank Entities in India

  • Airtel M Commerce Service Limited
  • Fino PayTech Limited
  • National Securities Depository Limited
  • Reliance Industries Limited
  • Shri Dilip Shantilal Shanghvi Cholamandalam
  • Distribution Service Limited
  • Shri Vijay Shekhar Sharma
  • Vodafone M-Pesa Limited
  • Department of Posts Aditya Birla Nuvo Limited
  • Tech Mahindra Limited

Provisions that every Payment Bank must adhere to

  • The Payments Banks are restricted from tolerating NRI stores.
  • It ought to have a base settled up capital of 100 crores.
  • Such banks can give ATMs or debit cards yet can't render loan and Visa administrations.
  • The Payment Banks can acknowledge current stores and investment funds bank stores from private ventures up to a recommended limit.
  • Likewise, they can acknowledge settlements as a channel.
  • Under the computerized foundation of Payments Banks, client can benefit a few internet banking solutions on lower cost. In any case, it is essential to agree to RBI compliances on data security, web banking, technology risk management, electronic banking, and cyber laws.

Procedure for Payment Bank License

  • Step 1

    Joining of a Public Limited Company, as per the Companies Act, 2013, RBI guidelines, with the primary goal of going about as a payment bank.

  • Step 2

    Application filling to the Chief General Manager of the Reserve Bank of India

  • Step 3

    The EAC (External Advisory Committee) will assess the application, and require data and conversations with the candidate.

  • Step 4

    RBI issues the license to the one who fulfils all the criteria

  • Step 5

    RBI’s official website will display the name of the applicant for bank license

  • Step 6

    On a fundamental level endorsement to work as a bank, will be taken up by the Reserve Bank of India. The bank should be set up within the time frame of 18 months.

Highlights of Payment Bank License

  • Upto a specific prescribed limit deposits are permitted for current deposits, small business, and saving bank deposit for individual.
  • NRIs don’t have the permission to make any deposit
  • Can issue ATM/Debit cards
  • Internet banking administrations are open under payment bank. These Banks are relied upon to offer ease banking solutions. (compliance of RBI guidelines on web banking, data security, electronic banking, technology risk management, digital laws is important).
  • Payment bank cannot indulge in lending activities
  • Payment bank can accept remittance as a channel

Payment Banks offers a distinct advantage that has the capability to meet the modern era needs and challenges. These days, the greater part of the individuals depend on cell phones to make a payent since it is increasingly advantageous and spares their opportunity to visit a bank. Also, Payment Bank guarantees safe internet banking because it is a secured mode financial institute which assists with the government’s dream of attaining ‘Digital India’. If you endeavour to build up a Payment Bank in India, at that point you should gather 100 crores paid up capital first. Subsequently, apply for the Payment Bank license method with the lawful help of a presumed warning.

Frequently Asked Questions

A Payments Bank is a “differentiated bank” set-up under the guidelines of the Reserve Bank of India (RBI) to further financial inclusion for the undeserved population by providing (i) current and savings accounts and (ii) payments or remittance services to migrant labor workforce, low income households, small businesses, unorganized sector entities and other users. This is to be done by enabling high volume-low value transactions in deposits and payments or remittance services in a secured technology-driven environment.

A vast majority of the rural population (approximately 61%, as per RBI), is still not covered by formal banking and are underbanked. An easily accessible payments network and universal access to savings is fundamental to financial inclusion. The country has had the experience of pre-paid Payment Instruments with reasonable success in facilitating payments in urban areas. Their customers, however, face several limitations and difficulties arising out of their non-banking status. On the other hand, entities like the Department of Posts ( DoP) have a wide network and experience of handling financial transactions, but do not have a banking license. Therefore, to bridge this gap, new, low cost, lean, modern technology based delivery models were needed to further financial inclusion with the differentiated scope of activities as laid out for payments bank.

Reserve Bank of India

Payment banks cannot lend or offer credit advance to customers like traditional banks. They can issue cheque books and debit cards but not credit cards. Also, unlike traditional banks, you can keep a limited sum in a payment bank account, currently capped at Rs 1 lakh per account.

Payments bank is an Indian new model of banks conceptualised by the Reserve Bank of India (RBI). 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.

The payments bank will not only drive revenues for DoP but also help in maintaining DOP’s brand image and relevance in the current finan cial landscape that is evolving rapidly. The payments bank will open new opportunities and increase DoPs market share. For example, today, DoPs ma rket share is only 0.3% of the Rs 6.2 Lakh crore utility bill payments transactions. The utility bill payments services of the payments bank as a Bharat Bill Payment Operating Unit (BBPOU) will help DoP in increasing our market share in the utility bill payments space and provide technology driven services to customers. The new age technology will enhance customer experience, provide more options and help in serving to the larger cause and vision of the GOI i.e. to bring about financial inclusion for the vast unbanked and underserved population.

  • Airtel M Commerce Service Limited
  • Fino PayTech Limited
  • National Securities Depository Limited
  • Reliance Industries Limited
  • Shri Dilip Shantilal Shanghvi Cholamandalam
  • Distribution Service Limited
  • Shri Vijay Shekhar Sharma
  • Vodafone M-Pesa Limited
  • Department of Posts Aditya Birla Nuvo Limited
  • Tech Mahindra Limited
  • Up to a specific prescribed limit deposits are permitted for current deposits, small business, and saving bank deposit for individual.
  • NRIs don’t have the permission to make any deposit
  • Can issue ATM/Debit cards
  • Internet banking administrations are open under payment bank. These Banks are relied upon to offer ease banking solutions. (compliance of RBI guidelines on web banking, data security, electronic banking, technology risk management, digital laws is important).
  • Payment bank cannot indulge in lending activities
  • Payment bank can accept remittance as a channel
  • Small Savings Account

    Payment/settlement administrations to work workforce, low pay family units, unorganized sectors, private ventures, high volume low worth exchanges and so forth.

  • Eligible Players

    1. Already keep going non-bank prepaid payment instrument that falls under the Payment and Settlement System Act, 2007

    2. Professional or Individual

    3. NBFCs

    4. Business correspondent

    5. Mobile operating companies

    6. Supermarket chains

    7. Public companies

    8. Public sector elements

  • How do payment banks function?

    Payments bank makes money by depositing the money with some other bank and/or government deposits which provides interest rates greater than that is provided by the payments bank.

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Sakshi Sharda
| Date: 09 Apr, 2020

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