The Payments Bank will be set up as a differentiated
bank and shall confine its activities to further the objectives for which it is
set up. Therefore, the Payments Bank would be permitted to undertake only
certain restricted activities permitted to banks under the Banking Regulation
Act, 1949, as given below:
Acceptance of demand deposits, i.e., current deposits,
and savings bank deposits. The eligible deposits mobilised by the Payments Bank
would be covered under the deposit insurance scheme of the Deposit Insurance
and Credit Guarantee Corporation of India (DICGC). Given that their primary
role is to provide payments and remittance services and demand deposit products
to small businesses and low-income households, Payments Banks will initially be
restricted to holding a maximum balance of Rs. 100,000 per customer. After the
performance of the Payments Bank is gauged by the RBI, the maximum balance can
be raised. If the transactions in the accounts conform to the “small accounts”1
transactions, simplified KYC/AML/CFT norms will be applicable to such accounts
as defined under the Rules framed under the Prevention of Money-laundering Act,
2002.
Payments and remittance services through various
channels including branches, BCs and mobile banking. The payments / remittance
services would include acceptance of funds at one end through various channels
including branches and BCs and payments of cash at the other end, through
branches, BCs, and Automated Teller Machines (ATMs). Cash-out can also be
permitted at Point-of-Sale terminal locations as per extant instructions issued
under the PSS Act. In the case of walk-in customers, the bank should follow the
extant KYC guidelines issued by the RBI.
Issuance of PPIs as per instructions issued from time
to time under the PSS Act.
Internet banking - The RBI is also open to applicants
transacting primarily using the Internet. The Payments Bank is expected to
leverage technology to offer low cost banking solutions. Such a bank should
ensure that it has all enabling systems in place including business partners,
third party service providers and risk managements systems and controls to
enable offering transactional services on the internet. While offering such
services, the Payments Bank will be required to comply with RBI instructions on
information security, electronic banking, technology risk management and cyber
frauds.
Functioning as Business Correspondent (BC) of other
banks – A Payments Bank may choose to become a BC of another bank for credit
and other services which it cannot offer.
The Payments Bank cannot set up subsidiaries to
undertake non-banking financial services activities. The other financial and
non-financial services activities of the promoters, if any, should be kept
distinctly ring-fenced and not comingled with the banking and financial
services business of the Payments Bank.
The Payments Bank will be required to use the word
“Payments” in its name in order to differentiate it from other banks.
Deployment of funds
The Payments Bank cannot undertake lending activities.
Apart from amounts maintained as Cash Reserve Ratio (CRR) with RBI, minimum
cash in hand and balances with a scheduled commercial bank/RBI required for
operational activities and liquidity management, it will be required to invest
all its monies in Government securities/Treasury Bills with maturity up to one
year that are recognized by RBI as eligible securities for maintenance of
Statutory Liquidity Ratio (SLR). The Payments Bank will participate in the
payment and settlement system and will have access to the inter-bank
uncollateralised call money market and the collateralised CBLO market for
purposes of temporary liquidity management.
6. Capital Requirement
Since the Payments Bank will not be allowed to assume
any credit risk, and if its investments are held to maturity, such investments
need not be marked to market and there may not be any need for capital for
market risk. However, the Payments Bank will be exposed to operational risk.
The Payments Bank will also be required to invest heavily in technological
infrastructure for its operations. The capital will be utilised for creation of
such fixed assets. Therefore, the minimum paid up voting equity capital of the Payments
Bank shall be Rs. 100 crore. Any additional voting equity capital to be brought
in will depend on the business plan of the promoters. Further, the Payments
Bank should have a net worth of Rs 100 crore at all times. The Payments Bank
shall be required to maintain a minimum capital adequacy ratio of 15 per cent
of its risk weighted assets (RWA) on a continuous basis, subject to any higher
percentage as may be prescribed by RBI from time to time. However, as Payments
Banks are not expected to deal with sophisticated products, the capital
adequacy ratio will be computed under simplified Basel I standards.
As the Payments Bank will have almost zero or
negligible risk weighted assets, its compliance with a minimum capital adequacy
ratio of 15 per cent would not reflect the true risk. Therefore, as a backstop
measure, the Payments Bank should have a leverage ratio of not less than 5 per
cent, i.e., its outside liabilities should not exceed 20 times its net-worth /
paid-up capital and reserves.
7. Promoter’s Contribution
The promoter’s minimum initial contribution to the
paid up voting equity capital of Payments Bank shall be at least 40 per cent
which shall be locked in for a period of five years from the date of
commencement of business of the bank. Shareholding by promoters in the bank in
excess of 40 per cent shall be brought down to 40 per cent within three years
from the date of commencement of business of the bank. Further, the promoter’s
stake should be brought down to 30 per cent of the paid-up voting equity
capital of the bank within a period of 10 years, and to 26 per cent within 12
years from the date of commencement of business of the bank. Proposals having
diversified shareholding and a time frame for listing will be preferred.
8. Foreign Shareholding
The foreign shareholding in the bank would be as per
the extant FDI policy.
9. Voting Rights And Transfer/Acquisition Of Shares
As per Section 12 (2) of the Banking Regulation Act,
1949, the voting rights in private sector banks are capped at 10 per cent,
which can be raised to 26 per cent in a phased manner by the RBI. Further, as
per Section 12B of the Act ibid, any acquisition of 5 per cent or more of
voting equity shares in a private sector bank will require prior approval of
RBI. This will also apply to the Payments Banks.
10. Prudential Norms
As the Payments Bank will not have loans and advances
in its portfolio, it will not be exposed to credit risk and, the prudential
norms and regulations of RBI as applicable to loans and advances, will
therefore, not apply to it. However, the Payments Bank will be exposed to
operational risk and should establish a robust operational risk management system.
Further, it may face liquidity risk, and therefore is required to follow RBI’s
guidelines on liquidity risk management, to the extent applicable.
11. Business Plan
The applicants for Payments Bank licences will be
required to furnish their business plans and project reports with their
applications. The business plan will have to address how the bank proposes to
achieve the objectives of setting up of Payments Banks. The business plan
submitted by the applicant should be realistic and viable. Preference will be
given to those applicants who propose to set up Payments Banks with access
points primarily in the under-banked States / districts in the North-East, East
and Central regions of the country. However, to be effective, the Payments Bank
should ensure widespread network of access points particularly to remote areas,
either through their own branch network or BCs or through networks provided by
others. The bank is expected to adapt technological solutions to lower costs
and extend its network. In case of deviation from the stated business plan
after issue of licence, RBI may consider restricting the bank’s expansion,
effecting change in management and imposing other penal measures as may be
necessary.
12. Corporate Governance
The Board of the Payments Bank should have a majority
of independent Directors.
The bank should comply with the corporate governance
guidelines including ‘fit and proper’ criteria for Directors as issued by RBI
from time to time.
SOURCE :RBI
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