Payment Bank License

Objectives of Payment Bank in India

The main objective behind the introduction of Payment Bank in India was to amplify the reach and ambit of the payment facilities to the small businesses and income groups. Further, the Reserve Bank of India, by way of the model of Payment Bank, wanted to increase the penetration of finances into the remote areas. The first-ever Payment Bank that got established in India is the Bharti Airtel.

Further, a comprehensive list of the Payment Banks that are operating in India are as follows:

• Aditya Birla Nuvo;
• Airtel M Commerce Services;
• Cholamandalam Distribution Services;
• India Post Payments Bank;
• Fino Paytech;
• National Securities Depository LTD;
• Reliance Industries;
• Vodafone M-Pesa;
• Paytm;
• Tech Mahindra;
• Sun Pharmaceuticals;

Key Benefits of the Payment Bank License in India

The key benefits of the Payment Bank License in India are as follows:

• Zero Account Balance:- One of the major benefits of a payment bank is that it is not mandatory and obligatory for the account holder to maintain a certain amount as the minimum required amount. That means one can have zero account balance as well.
• Higher Interest Rate:- The cost-saving benefit, due to operational efficiency, is further passed to the customer through higher interest.
• Convenience:- Another significant benefit of a Payment Bank is that due to its wide distribution network, the telecom services providers and mobile wallet are able to convert its retail outlets to separate banking points.
• Safe and Secure:- Due to 4 factor authentication, the concept of a payment bank is one of the secured models of online transaction introduced by the Reserve Bank of India.
• Account No is same as Mobile No:- Normally, this is not that significant feature, but it does increase the level of ease for the holders, who are an especially small business trader, merchants, etc., as there is no need for them to remember any other number as account number for carrying out transactions.
• Cashback and Discount Offers:- Similar to any other mobile wallet, a payment bank provides various discount and cashback offers to the holder.
• Additional Benefits:- A Payment Bank offers various benefits to its account holders other than the cashback and discount offers.

Characteristics of a Payment Bank License in India

The basic characteristics of a payment bank license in India are as follows-

• Offers Deposit up to Rs 2 lakh A payment bank with a payment bank license is eligible to accept deposits up to Rs 2 lakh. All the customers need to comply with the specified limit, and nobody is allowed to exceed the said limit at any point in time. Further, it shall be noted that an individual can opt to deposit an amount, either completely or partially. The Reserve Bank of India has stated that the limit to protect and safeguard customer’s interest and in regards to the relatively new nature of such banks.
• Facility of Virtual Debit Card Another peculiar characteristic of the payment bank having a payment bank license is that it provides the facility of both physical and virtual debit cards. Further, the debit cards render an edge to the customers to utilise all ATMs (Automated Teller Machines) in both the domestic boundaries and abroad. The facility of virtual debit cards does not demand any kind of extra charges on cash withdrawals. Moreover, the physical debit cards are supplemented by an annual fee only.
• Smooth Transactions through Online Portal Unlike the old and traditional banks, the concept of payment banks streamlines the procedure of making and receiving money through digital platforms. Also, it duly facilitates online fund transfer services, such as NIFT, IMPS and many more to the customers.
• Feasible Way of Making Payment Irrespective of where one resides or situate, he/ she can easily have the access of services to payment banks, as the same runs digitally. A payment bank with a payment bank license eliminates the requirement of visiting a physical bank for the purpose of depositing or withdrawing cash. Further, it shall be noted that anybody can start his/ her payments bank business online, that, too, without having any physical outlet. The only thing required is the Payment Bank License.

Who are all Qualified to Obtain Payment Bank License in India?

The ones who are qualified to obtain Payment Bank License in India are as follows:

• Individuals or Professionals;
• Mobile Telephone Companies;
• Non-Banking Financial Company (NBFC);
• Real Estate Sector Cooperatives;
• Supermarket Chains;
• Public Sector Entities;
• A Promoter or a Group of Promoters, who owns a Joint Venture, that, too, with an existing Scheduled Commercial Bank;
• Existing Non-bank PPIs (Prepaid Payment Instrument) under the Payment & Settlement Systems Act 2007;
• Corporate Business Correspondence;
• Public Companies;

Capital Requirements to Get Payment Bank License in India

Given below are the capital requirements to get payment bank license in India-

• The applicant company must have a minimum paid up equity of Rs 100 crore to start payment in India;
• In India, a payment bank is required to maintain a minimum CAR (Capital Adequacy Ratio) of 15 percent of its total RWA (Risk Weighted Assets). The same is subject to any such higher amount as specified by the RBI from time to time;
• Tier I Capital needs to be at least 7.5 percent of the total Risk Weighted Assets;
• Tier II Capital needs to be limited to a maximum of 100% of the whole Tier I Capital;
• A Payment Bank is not eligible to deal with sophisticated items. That means the Capital Adequacy Ratio (CAR) is identified based on the Basel Committee’s Standardised approaches.

Details to be Furnished with RBI for Payment Bank License

The details to be furnished with the Reserve Bank of India for acquiring a payment bank license are mentioned below-

Details from Individual Partner to Get Payment Bank License

The details required from the Individual Partner to get a payment bank license are as follows:

• Name of the Promoter;
• PAN (Permanent Account Number) No;
• Date of Birth of the Partner;
• Experience of the Individual Promoter;
• Residential Status;
• Parent’s Details;
• Branch Details;
• Current Bank Account Details, along with the Credit Facilities;
• Areas of Expertise;
• Past Track Record of the Business, together with Financial Worth.

Details from Entity Promoting the Bank

The details required from the Entity Promoting the Bank are as follows:

• Shareholding Pattern of the Entity Promoting the Bank;
• Memorandum of Association (MOA) of the Entity Promoting the Bank;
• Articles of Association (AOA) of the Entity Promoting the Bank;
• Financial Statements for the previous five financial years of the entity promoting the bank;
• Income Tax Returns (ITRs) for the previous three financial years;

Common Details from Entities for Bank & Individual Partner

• Names of all the Individual Partners and Entities operating in the Promoter Group;
• Details of the prevailing Shareholding Pattern;
• Pictorial Organogram;
• Details of the Management;
• Total Assets and Liabilities of the Entities;
• Annual Financial Report for the previous Five Years;
• Details of the Listing Shares in the RSE (Recognised Stock Exchanges);
• Permanent Account Number) details;
• Tax Deduction & Collection Account Number;
• Company Identification Number;
• Bank Account Details;
• Bank Branch Details.

Activities Permitted by Obtaining Payment Bank License in India

The activities permitted by obtaining a payment bank license in India are as follows:

• A Payment Bank is eligible to accept deposits up to a prescribed threshold. Further, the term “deposits” comprises of the current deposits made by the small level merchants and saving bank deposits made by an individual;
• NRIs (Non Resident Individuals) are not eligible to make any kind of deposit in the Payment Banks;
• A Payment Bank is eligible to issue ATM or Debit Cards to its customers;
• Payment Banks are not eligible to engage in the Lending Activities;
• A Payments Bank needs to carry out its own Know Your Customer (KYC)/ Anti Money Laundering (AMT), and Combating Financial Terrorism (CFT) exercise like any other similar bank;
• In India, a Payment bank is not eligible to offer Loan & Visa Administrations;
• A Payment Bank can engage in payments & remittance services by way of ATMs (Automated Teller Machines), Business Correspondent, and mobile banking. Further, it shall be noted that remittance and payment services may comprise of acceptance of funds at one end by various channels, such as branches and BCs, and the payments of cash at the other end;
• A Payment Bank must issue Prepaid Payment Instruments (PPIs) in accordance with the instructions given under the provision of the Payment and Settlement Instrument Act 2007;
• A Payment Bank is eligible to provide Internet Banking Services;
• A Payments Bank is eligible to become Business Correspondent of some other bank, based on the guidelines issued by the RBI;
• A Payment Bank can operate as a medium of accepting remittances from scheduled banks under the payment mechanism approved by the RBI, such as RTGS/NEFT/IMPS;
• A Payment Bank is allowed to deal with the Cross Border Remittance Transactions in the nature of personal remittances;
• A Payment Bank is not eligible to establish subsidiaries to carry out the activities and operations of an NBFC;
• Payment Banks is allowed to make payment of the utility bills on behalf of their customers & the general public;
• A Payment Bank is eligible to carry out other non risk sharing simple financial services operations but with the approval of the RBI. Also, it needs to satisfy the requirements of the regulatory sector for such products;

Process of Obtaining Payment Bank License

The steps involved in the process for obtaining Payment Bank License are as follows:

• In the first step, there is a need for the applicant to get a Public Limited Company registered under the provisions of the Companies Act 2013;
• Now, file an application for authorisation to the CGM (Chief General Manager) of the Apex Bank to issue the Payment Bank License;
• In the next step, the EAC (External Advisory Committee) is required to assess the filed application. After that, it need to summon the applicant to authenticate the information given by them;
• RBI will issue the Payment Bank License if the applicant company is able to fulfil all the specified criteria;
• Subsequent to the last step, the name of the said applicant will be displayed on the official website of RBI;
• Lastly, after obtaining the principal approval to work as a payment bank from Apex Bank, the said applicant company needs to establish a bank within a period of 18 months, starting from the date of issuance of the license.

Timeline for Securing RBI License for Payment Banks

The time it takes to acquire a RBI license for payment banks in India is 25 to 30 working days. The timeline may get extended due to regulatory delay.

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