INTRODUCTION TO PAYMENT BANK
Payment Banking is a contemporary banking concept. Such banks an Indian new model of banks conceptualized by the Reserve Bank of India (RBI). The concept of payment banking was introduced back in 2013 when RBI framed a committee for Comprehensive Financial Services for Small Businesses and Low Income Households. With all study and research, RBI published the guideline for payment banks.
Payment Banking was introduced to expand the formal financial system and to make banking more exclusive to marginalized people. Payment banks have stormed the Indian and other South Asian markets. It is a comprehensive financial service or a special bank, which are expected to reach customers mainly through their mobile phones services rather than traditional bank branches. A payment bank can only receive deposits and provide remittance. It cannot carry out any lending activities.
OBJECTIVES OF PAYMENT BANK
The main objective of establishing payment banks is to further financial inclusion by providing small savings accounts and payments/remittance services to migrant labor workforce, low income households, small businesses, other unorganized sector entities and other users.
DIFFERENCE BETWEEN PAYMENT BANK, TRADITIONAL BANK, AND E-WALLETS
| Features | Payment Banks | Traditional Banks | E-Wallets |
| Making Deposits | YES | YES | YES |
| Interest on Deposits | YES | YES | NO |
| Withdrawal Facility | YES | YES | NO |
| Availing of Loans | NO | YES | NO |
| Credit Cards | NO | YES | NO |
| Buying Investment Products | YES | YES | NO |
| Deposit Limit | Rs. 2 LAKH | NO LIMIT | – |
REGULATION FOR PAYMENT BANKS
- Payment Banks are registered as a public limited company under Companies Act, 2013
- Such banks are issued a license under Section 22 of the Banking Regulation Act 1949
- Payment Banks will not have significant credit and market risks.
- Payment Banks need to have minimum paid-up capital of Rs. 100 crore.
- Payment Banks need to maintain a minimum capital adequacy ratio of 15 percent of risk-weighted assets (RWA).
- Maximum balance at the end of the day has a limit of Rs. 2 lakh per individual customer.
FEATURES OF PAYMENT BANKS
- Payment banks need to have a minimum paid-up capital of Rs. 100,00,00,000
- Payment banks can accept the money from people as a deposit with a limit fixed Rs. 1 Lakh
- Payment banks can issue ATM or debit cards to the customers
- Payment banks can open both saving and current accounts of the customers.
- Payment banks can make personal payments and receive remittances from cross border
- Payment banks need to deposit the amount in the form of a Cash Reserve Ratio (CRR) with RBI like any other commercial banks.
- Payment banks can provide internet banking and mobile banking facilities to their customers.
- Payment banks can sell financial products like mutual funds, pension products, and insurance products.
WHAT PAYMENT BANKS CANNOT DO
- Payment banks cannot perform any type of credit and lending function
- Payment banks cannot issue credit cards
- Payment banks cannot accept time deposits from its customers
- Payment banks cannot set up subsidiaries to undertake non-banking financial activities
- Payment banks cannot accept deposits from Non-Resident Indians (NRIs)
PAYMENT BANKS IN INDIA
There are currently 6 Payment Banks licensed by RBI which are allowed to function in India.
- Airtel Payments Banks Limited
- India Post Payments Bank Limited
- FINO Payments Bank Limited
- Paytm Payments Bank Limited
- Jio Payments Bank Limited
- NSDL Payments Bank Limited
INDIAN PAYMENT BANK REVIEW
| Payment Banks | Established | CEO | Total Asset (2019-2020) |
| Airtel | January, 2017 | Anubrata Biswas | Rs. 12,68,53,92,000 |
| India Post | September, 2018 | J. Venkatramu | Rs. 16,45,26,68,540 |
| FINO | April, 2017 | Rishi Gupta | Rs. 6,24,00,16,000 |
| Paytm | 2010 | Vijay Shekhar Sharma | Rs. 10,50,70,20,00,000 |
| Jio | April, 2018 | Srikrishnan H | Rs. 2,51,23,07,000 |
| NSDL | October, 2018 | Padmaja Chunduru | Rs. 92,96,04,30,000 |
SERVICES PROVIDED BY PAYMENT BANKS
- Payment bank can accept deposit up to maximum of Rs. 2 lakh for individual customer
- Demand deposit and saving bank deposit can be accepted from individual, firms and other entities
- Payment banks pay interest on the deposit just like normal banks
- Such banks are allowed to transfer payment through channels like branches, ATM, business agents
- Payment banks can issue debit cards/ATM cards to its customers
- Payment banks can provide mobile banking service to its customer
- A payment bank can be involved in providing basic financial services like insurance, mutual funds, pension funds, forex services, remittances etc.
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