RBI issues final norms for small, payment banks Paving the way to bring in cash — kept in steel boxes at home in rural areas, inside the shoes of a migrant labourer in a mega city and other such ingenious storage spaces – into the formal banking system, the RBI on Thursday released the final set of guidelines for payments banks. The payments banks will be allowed to accept savings deposits primarily from the un-banked and under-banked population up to a maximum of Rs 1 lakh an individual customer. The Reserve Bank of India yesterday issued final guidelines for payments and small banks that aim to take banking services to more people and small businesses. The RBI aims to push financial inclusion by setting up these niche outfits — small finance banks that can have all-India operations and payments banks, which can accept more deposits. The guidelines open up an window of opportunity for entities which did not bag new bank licences in April. Shriram Capital, Janalakshmi Financial Services, Magma Fincorp and Muthoot Finance, among others, are expected to throw their hats into the ring to set up small banks. The Department of Posts, Bharti Airtel, Vodafone India, Tata Teleservices, Western Union and online digital payment players such as Paytm, Oxigen and MobiKwik have expressed interest in floating payment banks. The minimum paid-up equity capital for both small and payment banks has been pegged at Rs 100 crore. Who are eligible? Eligible promoters for a small bank include resident individuals/professionals with experience in banking and finance; and companies and societies. Existing non-banking finance companies (NBFCs), microfinance institutions and local area banks can also opt to convert into a small bank. The RBI said proposals from large public sector entities and industrial and business houses, including NBFCs promoted by them, will not be entertained to set up small banks. In the case of payment banks, the eligible promoters will include existing non-bank prepaid payment instrument issuers and other entities such as individuals/professionals; NBFCs, corporate business correspondents, mobile telephone operators, and super market chains. A promoter/promoter group can have a joint venture with an existing scheduled commercial bank to set up a payment bank, subject to the stake holding complying with the Banking Regulation Act. Key activities The small bank will primarily undertake basic banking activities of acceptance of deposits from un-served and under-served sections, including small business units, small and marginal farmers, micro and small industries and unorganised sector entities. Small banks will be required to maintain a minimum capital adequacy ratio of 15 per cent of the loans on a continuous basis. In the draft guidelines, the RBI had suggested that small banks would have a restricted area of operations (possibly contiguous districts in a homogenous States). However, in the final guidelines, these restrictions have been removed. The small bank will be required to extend 75 per cent of its credit to the priority sector. Payments banks can accept deposits — current and savings bank — from individuals, small businesses and other entities. However, they cannot accept non-resident Indian deposits. The payment bank will initially be restricted to holding a maximum balance of Rs 1 lakh per individual customer. While the bank can issue ATM/debit cards, it cannot issue credit cards. It can contract outside liabilities (deposits) but not exceeding 33.33 times (against 20 times in the draft guidelines) its net worth. They will also be allowed to issue ATM/debit cards, remit money from one account to another, a move that should benefit migrant labourers. However, much will depend on the transaction fee charged for such transfers. “The objectives of setting up of payments banks will be to further financial inclusion by providing small savings accounts and payments/remittance services to [the] migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users,” the RBI said. Such banks will be allowed distribute non-risk sharing simple financial products like mutual fund units and insurance products. They will also be allowed to become a business correspondent of another bank. Off limits Payments bank will, however, not be allowed to loan money. The RBI has proposed setting up small finance banks for lending to small businesses and consumers. To protect depositors, the RBI has mandated that payments banks will be required to invest a minimum 75 per cent of the deposits collected from the public in government securities with up to one year maturity. They will be allowed to hold a maximum of 25 per cent in current and time/fixed deposits with other scheduled commercial banks for operational purposes and liquidity management. No other market investment will be allowed. The RBI said that existing non-bank Pre-paid Payment Instrument (PPI) issuers; other entities such as individuals / professionals; Non-Banking Finance Companies (NBFCs), corporate Business Correspondents (BCs), mobile telephone companies, super-market chains, companies; owned and controlled by residents; and public sector entities can apply to set up payments banks. #ReserveBankofIndia #RBI #PaymentBanks #SmallBanks #Guidelines #FinancialInclusion
Posted on: Fri, 28 Nov 2014 06:00:01 +0000
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