What are Payment Banks?

It is new model of banks by the RBI, which can accept restricted deposits currently limited to Rs 1 lakh per customer with the scope to increase further in future. The key features of the banks are lower charges with account, higher interest rate, conveyance to carry out door to door banking services. Generally banks tie up with BC’s and other banks to provide services that do not come carry the scope of credit risk. In India, Bharti Airtel is the first live payment bank.

Why Payment Banks?

The entire object of payment banks is to broaden the scope of payment and financial services to people with low incomes like low-income households, small businesses, migrant-labour workforce etc.

It all started with in sep. 2013 where RBI constituted a committee to study comprehensive financing services to propose measures to achieve financial inclusion and to widen access to financial services. The key suggestion of the committee was to bring in specialised banks (payment banks) to those who have low income and run small businesses so by jan 2016, every Indian Resident can hold a global bank account

Eligibility Criteria for Payment Finance Banks:

  • Required to maintain CRR with the RBI on its outside demand and time liabilities.
  • Invest min 75% of its demand deposit balances in SLR eligible Government securities/treasury bills with maturity upto 1 year.
  • Hold max 25% in current and time/fixed deposits with other scheduled commercial banks
  • Minimum paid-up capital for payment banks shall be Rs 100 crores
  • Leverage ratio should not be less than 3%
  • Promoter’s minimum initial contribution to the paid-up equity capital at least be 40 per cent for the first five years.
  • Foreign shareholdings should be as directed by FDI policy for private banks which is amended time to time.