MANY
NEWS ARE COMING ABOUT PAYMENT BANK LICENSE TO DOP
SO
WE MUST KNOW WHAT WILL HAPPEN WHEN DOP WILL GET IT .
HERE IS THIS INFO
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.
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.
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.
Foreign shareholding
The
foreign shareholding in the bank would be as per the extant FDI policy.
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.
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.
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.
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.
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