Payment Bank License
A payments bank is like any other bank, but operating on a smaller scale without involving any credit risk. In simple words, it can carry out most banking operations but can’t advance loans or issue credit cards.
Payments Bank is a distinguished micro-bank with limited banking functions set up under the payments banks guidelines issued by the Reserve Bank of India (“RBI”). In the recent time, RBI main focus has been the financial inclusion. Payments banks is an endeavor to make sure that all sections of society, including people living in remote and rural areas, have access to banking facilities.
Such kind of Banks provides the financial services through smartphones since it may not be economical for conventional banks to have branches in remote areas
Normally, a payments bank has a low deposit limit which is a comfortable amount even for persons belonging to lower income groups. Since the transactions are cashless, it will also help in transitioning the users to a less-cash dependent lifestyle.
Who is the Eligible Promoter?
- Non-bank Pre-paid Payment Instrument issuers
- Non-Banking Financial Company
- Corporate Business correspondence
- Mobile telephone Companies
- supermarket chains
- real sector cooperatives
- public sector entities
- A promoter/promoter group can have a joint venture with an existing scheduled commercial bank
The promoter shall comply with following conditions:
- Capital requirement:
Shall at least have a minimum of INR 100 crore.
- Promoter’s contribution:
Initial promoter contribution shall have at least 40 % of total paid-up capital for the first five years from the commencement of business.
- Foreign shareholding:
The foreign shareholding in the payments bank would be as per the Foreign Direct Investment (FDI) policy for private sector banks. So currently FDI up to 49% is permitted in private banks under the automatic route and further FDI up to 74% investment falls under the prior government approval route.
- Voting rights of shareholders:
The voting rights of stakeholders in a payments Bank Company will be regulated as per the Banking Regulation Act, 1949, which in the first instance caps voting rights of a shareholder in a private sector bank at 10%. This limit can be increased by RBI up to a maximum of 26% in a phased manner.
- Prior approval of RBI:
Acquisition of more than 5% of stake in the payments bank company by any party will require prior approval of RBI.