What is Payments Bank – Capital Requirement, Limitations
A Payments Bank is like any other bank, which is set up to provide financial services to unbanked and under-banked population of the country. The RBI appointed Nachiket Mor Committee had recommended for setting up of Payments bank in 2014 to improve financial inclusion in the country. The objectives of setting up such type of banks are to further financial inclusion by providing following services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users:
- Small Savings accounts
- Payments/Remittance Services
- The minimum paid-up equity capital is Rs. 100 crore.
- It should have a leverage ratio of not less than 3 per cent, i.e., its outside liabilities should not exceed 33.33 times its net worth (paid-up capital and reserves).
- The promoter’s minimum initial contribution to the paid-up equity capital shall at least be 40 per cent for the first five years from the commencement of its business. Shareholding of the promoters should be brought down to 40 per cent within three years, 30 per cent within a period of 10 years, and to 26 per cent within 12 years from the date of commencement of business of the bank
- The foreign shareholding in the would be as per the Foreign Direct Investment (FDI) policy for private sector banks as amended from time to time
Services offered by Payments Bank
- The bank can accept demand deposits with maximum balance of 100,000 per individual customer.
- They can issue ATM/Debit Cards.
- They can provide payments and remittance services through various channels.
- They can act as Business Correspondents of another bank
- They can act as distribution channel of non-risk sharing simple financial products like mutual fund units and insurance products, etc.
Limitations of Payments Bank
- They cannot issue credit cards
- They cannot undertake lending activities
Capital Adequacy Requirements
- Minimum Capital Requirement – 15%
- Common Equity Tier- 16%
- Additional Tier – 1.5%
- Minimum Tier I capital – 7.5%
- Tier 2 capital – 7.5%
- Capital Conservation Buffer – Not Applicable
- Counter-cyclical capital buffer – Not applicable
- Pre-specified Trigger for conversion of AT1 – CET1 at 6% up to March 31, 2019, and 7% thereafter
List of Payments Bank in India
There are six payment banks in India:
- Airtel Payments Bank Limited
- Paytm Payments Bank
- Fino Payments Bank
- Indian Post Payments Bank
- Jio payments Bank
- Aditya Birla Idea payments Bank
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