Payments banks are new model of banks, conceptualised by the
Reserve Bank of India
The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible for ...
(RBI), which cannot issue credit. These banks can accept a restricted deposit, which is currently limited to
₹200,000 per customer and may be increased further. These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks. Payments banks can issue ATM cards or debit cards and provide online or mobile banking.
Bharti Airtel
Bharti Airtel Limited, commonly known as (d/b/a) Airtel, is an Indian multinational telecommunications services company based in New Delhi. It operates in 18 countries across South Asia and Africa, as well as the Channel Islands. Currently, ...
set up India's first payments bank,
Airtel Payments Bank.
History
On 23 September 2013,
, headed by
Nachiket Mor
Nachiket Mor is an Indian banker. He is currently National Director for Bill and Melinda Gates Foundation. He is known for his inventions of financial devices to deliver banking service to villages and contribution in trying to solve India's fi ...
, was formed by the RBI.
On 7 January 2014, the Nachiket Mor committee submitted its final report.
Among its various recommendations, it recommended the formation of a new category of bank called payments bank.
On 17 July 2014, the RBI released the draft guidelines for payment banks, seeking comments for interested entities and the general public.
On 27 November, RBI released the final guidelines for payment banks.
In February 2015, RBI released the list of entities which had applied for a payments bank licence. There were 41 applicants.
It was also announced that an external advisory committee (EAC) headed by Nachiket Mor would evaluate the licence applications.
On 28 February 2015, during the presentation of the
Budget
A budget is a calculation play, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, environmenta ...
it was announced that
India Post
India Post is a government-operated postal system in India, part of the Department of Post under the Ministry of Communications. Generally known as the Post Office, it is the most widely distributed postal system in the world. Warren Hastings ha ...
will use its large network to run
payments bank.
The external advisory committee headed by Nachiket Mor submitted its findings on 6 July 2015. The applicant entities were examined for their financial track record and governance issues.
[ On 19 August 2015, the Reserve Bank of India gave "in-principle" licences to 11 entities to launch payments banks.] The "in-principle" license was valid for 18 months within which the entities must fulfil the requirements and they were not allowed to engage in banking activities within the period. The RBI will grant full licenses under Section 22 of the Banking Regulation Act, 1949
The Banking Regulation Act, 1949 is a legislation in India that regulates all banking firms in India. Passed as the Banking Companies Act 1949, it came into force from 16 March 1949 and changed to Banking Regulation Act 1949 from 1 March 1966. ...
, after it is satisfied that the conditions have been fulfilled.
March 2019 witness, Paytm account for over 19% of all mobile-banking transactions while Airtel's Payments Bank contributed more than 5% to the 867 million transactions made during the month. In contrast, State Bank of India (SBI), the largest lender in the country by assets, recorded 145 million transactions, accounting for under 17%.The only banks ahead of Airtel Payments Bank are SBI and the three largest private-sector banks – HDFC Bank, ICICI Bank and Axis Bank. Indeed, ICICI Bank saw close to 60 million mobile-banking transactions in March 2019 though it was just a whisker ahead of Airtel, with under 7% of the market. Paytm Payments Bank and Airtel Payments Bank together command over 88% of the deposits in payment banks in India in 2018.
According to the Reserve Bank of India
The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible for ...
's report on ‘Trend and progress of Banking in India 2017-2018', the payment banks reported losses in the financial year 2017-2018, after a weak performance in the FY 2016-17.
Regulations
The minimum capital requirement is Rs.100 crore. For the first five years, the stake of the promoter should remain at least 40%. Foreign share holding will be allowed in these banks as per the rules for FDI in private banks in India. The voting rights will be regulated by the Banking Regulation Act, 1949
The Banking Regulation Act, 1949 is a legislation in India that regulates all banking firms in India. Passed as the Banking Companies Act 1949, it came into force from 16 March 1949 and changed to Banking Regulation Act 1949 from 1 March 1966. ...
. The voting right of any shareholder is capped at 10%, which can be raised to 26% by the Reserve Bank of India
The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible for ...
. Any acquisition of more than 5% will require approval of the RBI. The majority of the bank's board of directors should consist of independent directors, appointed according to RBI guidelines.
The bank should be fully networked from the beginning. The bank can accept utility bill
An invoice, bill or tab is a commercial document issued by a seller to a buyer relating to a sale transaction and indicating the products, quantities, and agreed-upon prices for products or services the seller had provided the buyer.
Payment t ...
s. It cannot form subsidiaries to undertake non-banking activities. Initially, the deposits will be capped at per customer, but it may be raised by the RBI based on the performance of the bank. Payment Banks are not permitted to lend to any person including their directors. 25% of its branches must be in the unbanked rural area. The bank must use the term "payments bank" in its name to differentiate it from other types of bank. The banks will be licensed as payments banks under Section 22 of the Banking Regulation Act, 1949
The Banking Regulation Act, 1949 is a legislation in India that regulates all banking firms in India. Passed as the Banking Companies Act 1949, it came into force from 16 March 1949 and changed to Banking Regulation Act 1949 from 1 March 1966. ...
, and will be registered as public limited company
A public limited company (legally abbreviated to PLC or plc) is a type of public company under United Kingdom company law, some Commonwealth of Nations, Commonwealth jurisdictions, and the Republic of Ireland. It is a limited liability company ...
under the Companies Act, 2013
The Companies Act 2013 is an Act of the Parliament of India on Indian company law which regulates incorporation of a company, responsibilities of a company, directors, dissolution of a company. The 2013 Act is divided into 29 chapters containin ...
.[
]
Banks
Bharti Airtel
Bharti Airtel Limited, commonly known as (d/b/a) Airtel, is an Indian multinational telecommunications services company based in New Delhi. It operates in 18 countries across South Asia and Africa, as well as the Channel Islands. Currently, ...
launched India's first payments bank named Airtel Payments Bank in March 2017. Paytm Payments Bank, India Post Payments Bank, Fino Payments Bank and Aditya Birla Payments Bank have also launched services.
Of the 41 applicants, the list of RBI approved for provisional payments bank licenses are:
# Aditya Birla Nuvo Limited
# Airtel M Commerce Services Limited
# Cholamandalam Distribution Services Limited
# India Department of Posts
# Fino PayTech Limited
# National Securities Depository Limited
National Securities Depository Limited (NSDL) is an Indian central securities depository, based in Mumbai. It was established in August 1996 as the first electronic securities depository in India with national coverage. It was established base ...
# Reliance Industries Limited (Jio)
# Shri Dilip Shantilal Shanghvi (Sun Pharmaceuticals)
# Paytm Payments Bank Limited
# Tech Mahindra Limited
# Vodafone m-pesa Limited
The following is the list of those who surrendered their license:
# Cholamandalam Distribution Services
# Sun Pharmaceuticals
# Tech Mahindra
The following is the list of active payments banks:
# Airtel Payments Bank
# India Post Payments Bank
India Post Payments Bank, abbreviated as IPPB, is a division of India Post which is under the ownership of the Department of Post, a department under Ministry of Communications of the Government of India. Opened in 2018, as of January 2022, t ...
# Fino Payments Bank
# Jio Payments Bank
Jio Payments Bank is an Indian payments bank, which started operating in 2018 and is owned by Reliance Industries. Reliance Industries was granted an in-principle approval by the Reserve Bank of India (RBI) to establish a new payments bank un ...
# Paytm Payments Bank
Paytm Payments Bank (PPBL) is an Indian payments bank, founded in 2015 and headquartered in Noida. In the same year, it received the license to run a payments bank from the Reserve Bank of India and was launched in November 2017. In 2021, the ban ...
# NSDL Payments Bank
The following is the list of defunct payments banks:
# Aditya Birla Payments Bank
Aditya Birla Payments Bank Limited (ABPB) was a payments bank started as a joint venture by Aditya Birla Nuvo Ltd. and Idea Cellular. Launched on 22 February 2018, it is the fourth payments bank to begin operations since issuance of licenses to ...
(26 July 2019)
# Vodafone m-pesa Limited
Criticism
S. Kalyanasundaram has written that the payments bank model is unviable due to restriction from lending and rules for cash reserve ratio
In economics, cash is money in the physical form of currency, such as banknotes and coins.
In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-imm ...
and statutory liquidity ratio which leaves very little space for generating income for the payments banks.
Further reading
A Trilemma and a Possible Solution - Can Payments Banks Succeed?
Economic & Political Weekly Vol 55, Issue 15, 11 April 2020 Dr Indradeep Ghosh & Ajit Ranade
Ajit Ranade is an economist, political analyst and reporter based out of Mumbai, India. Currently he is Vice Chancellor of Gokhale Institute Of Politics & Economics Pune.
Education
He is a PhD in economics from Brown University. He is a B.Tech. ...
Tracking performance of Payments Banks against Financial Inclusion Goals
Amulya Neelam & Anukriti Tiwar
Dvara Research
See also
* Regional Rural Bank
Regional Rural Banks (RRBs) are government owned scheduled commercial banks of India that operate at regional level in different states of India. These banks are under the ownership of Ministry of Finance , Government of India. They were creat ...
* Banking in India
Modern banking in India originated in the mid of 18th century. Among the first banks were the Bank of Hindustan, which was established in 1770 and liquidated in 1829–32; and the General Bank of India, established in 1786 but failed in 1791. ...
* Small finance bank
Small may refer to:
Science and technology
* SMALL, an ALGOL-like programming language
* Small (anatomy), the lumbar region of the back
* ''Small'' (journal), a nano-science publication
* <small>, an HTML element that defines smaller text
...
References
External links
{{Banking in India
*
Banking in India