Payment Bank License
In the dynamic landscape of banking, Payment Banks have emerged as a transformative force, offering accessible financial services to all. Originating from the vision of the Reserve Bank of India in 2013, these banks stand as beacons of inclusion, bridging the gap between traditional banking and the unbanked masses. With a focus on simplicity and digital innovation, Payment Banks pave the way for seamless transactions and financial empowerment. However, gaining a Payment Bank License is no small feat, requiring meticulous planning, adherence to regulatory standards, and a commitment to serving underprivileged regions. From the initial screening to the establishment of outlets and adherence to strict operational guidelines, the journey of a Payment Bank is fraught with challenges and opportunities.
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What is Payment Banks?
In the banking world, there's been a lot of talk about Payment Banks lately. They're seen as the next big thing, especially for the government's goal of including more people in the financial system. These banks work like regular banks, except they don't give out loans or credit cards. Payment Banks make banking easier by offering various services through safe digital platforms. This special kind of Bank was introduced by RBI, back in 2013. They're almost similar to other banks and perform functions as defined by the Banking Regulation Act, 1949 from sections 5(b) and 6(1)(a) to (o). The idea behind Payment Banks is to make payment services more accessible, especially to citizens with lower incomes and small businesses. The RBI hopes these banks will bring financial services to remote areas where they're needed most. These banks are all about making banking simpler and reaching more people, wherever they are. For eg: Bharti Airtel’s Airtel Payments Bank (first payment bank of India), India Post Payments Bank, Fino Payments Bank, Jio Payments Bank etc.
- What is a Payment Bank Licence?
- Features of a Licensed Payments Bank
- What are the Requirements to Obtain a Payment Bank License?
- Who can Obtain a Payment Banks License?
- What Information is Required for Obtaining Payment Bank Licence?
- Business Plan Requirements for Payment Bank
- Procedure to Obtain a Payment Bank License
- Scope of Activities After Obtaining Payment Bank License
- Why RegisterKaro?
- Frequently Asked Questions
Payment Bank License
What is a Payment Bank Licence?
Payment Bank License is a mandatory requirement to open a Payment Bank in India. The applicant needs to fulfil the eligibility criteria before applying for the license. The Reserve Bank of India has the authority to issue the Payment Bank License as per section 22 of the Banking Regulation Act, 1949.
Features of a Licensed Payments Bank
Licensed Payment Banks come with the following features:
1. Deposit Limit of Rs. 1 lakh : RBI has authorised Payment Banks to accept deposits up to Rs. 1 lakh only. This limit is prescribed by RBI to safeguard customer interests.
2. Debit Card Facility : Payment Banks offer both physical and virtual debit cards, enabling users to access ATMs domestically and internationally without additional charges for cash withdrawals.
3. Seamless Online Transactions : Unlike traditional banks, Payment Banks streamline money transfers and transactions through digital platforms, providing online services for fund transfers such as NEFT, IMPS, and others.
4. Convenient Payment Methods : Regardless of location, Payment Banks enable digital payments, reducing the necessity of visiting physical bank branches for cash deposits or withdrawals.
What are the Requirements to Obtain a Payment Bank License?
The following are the requirements, which need to be fulfilled before making an application for a Payments Bank Licence:
1. Paid-up equity capital : The entity which wishes to obtain the Payment Bank Licence shall have a paid-up equity capital of a minimum of Rs.100 crore.
2. Capital Adequacy Ratio : Payment Banks are required to uphold a minimum capital adequacy ratio of 15 per cent of their Risk Weighted Assets (RWAs), which may be adjusted to a higher percentage as directed by the RBI. The Tier I Capital should constitute at least 7.5 per cent of the RWAs, while Tier II Capital is capped at a maximum of 100 per cent of the total Tier I Capital. Despite not engaging in complex financial products, Payment Banks compute their Capital Adequacy Ratio according to the standardized approaches outlined by the Basel Committee.
3. Structure of Entity : The entity which wishes to obtain the Payment Bank Licence must be a Public Limited Company registered under the Companies Act, 2013
Who can Obtain a Payment Banks License?
The following persons are eligible to obtain a Payment Bank License:
1. Individuals/Professionals
2. Mobile telephone companies
3. Non-Banking Financial Companies (NBFCs)
4. Real sector cooperatives
5. Supermarket Chains
6. Public sector entities
7. Promoter or group of promoters who have a joint venture with a scheduled commercial bank
8. Non-bank prepaid payment instrument under the Payment and Settlement Systems Act, 2007
9. Corporate Business Correspondence
10. Public companies
What Information is Required for Obtaining Payment Bank Licence?
To obtain a Payments Bank License from the RBI, the following details must be provided:
1. Information of the Individual Promoter:
a. Name, Date of Birth, and Residential Status of the Promoter.
b. Parent’s Name.
c. PAN No.
d. Branch and Bank Account Details, including any Credit Facilities.
e. Experience and Areas of Expertise of the Individual Promoter.
f. Track Record of Business and Financial Worth.
2. Information of the Entity Promoting the Bank:
a. Shareholder Pattern of the Promoter Entity.
b. Memorandum and Articles of Association.
c. Financial statements from the past five years of the promoter entity.
d. Income tax returns for the last three years.
3. Information of the Individuals and Entities in the Promoter Group:
a. Names of individuals and entities.
b. Details of shareholding.
c. Management details.
d. Pictorial Organogram.
e. Total Assets of Entities.
f. Annual Reports from the previous five years of all group entities.
g. Details of Listing in Stock Exchanges.
h. PAN No., TAN No., CIN No.
i. Bank Account and Branch Details.
Business Plan Requirements for Payment Bank
Applicants seeking a Payment Bank license are required to submit project reports and business plans along with their applications. These plans must outline how the bank intends to achieve the objectives of establishing Payment Banks. The business plan provided by the applicant must be both accurate and feasible. Preference will be given to applicants proposing to establish Payment Banks with access points primarily in underdeveloped states or districts within the Central, East, and North-East regions of the country. Payment Banks must ensure a wide network of access points, especially in remote areas, either through Business Correspondents (BCs), their branches, or through networks provided by others. They are expected to employ technological solutions to expand their network and reduce costs.
If a Payment Bank strays from its stated business plan after receiving the license, the regulatory authority may take action. This could include restricting the bank's expansion, changing its management, or imposing other penalties as deemed appropriate.
Procedure to Obtain a Payment Bank License
The step-by-step process for applying for a Payment Bank License is as follows:
1. Register as a Public Limited Company : The Payment Bank must register itself as a Public Limited Company under the Companies Act, 2013.
2. Apply for License : The Payment Bank needs to apply for a license under Section 22 of the Banking Regulation Act, 1949. This application is made using Form-III, as per Rule 11 of the Banking Regulation (Companies) Rules, 1949. It should be addressed to the Chief General Manager of the Department of Banking Regulation of the RBI.
3. Initial Screening : The RBI conducts an initial screening to assess the prima facie eligibility of the applicant. Additional criteria may be applied if necessary.
4. Evaluation by External Advisory Committee (EAC) : An External Advisory Committee, comprising professionals such as Chartered Accountants, Finance Professionals, and Bankers, evaluates the applications. Discussions with the applicants may be held at this stage if required.
5. In-Principle Approval : The RBI makes the final decision to issue an in-principle approval. This approval remains valid for 18 months, during which the bank must be established.
6. Additional Conditions : If any adverse features are observed, the RBI may impose additional conditions or withdraw the in-principle approval.
Scope of Activities After Obtaining Payment Bank License
Once a Payments Bank secures its license, it's allowed to establish its outlets, including branches, Automated Teller Machines (ATMs), and Business Correspondents (BCs). These outlets can only engage in specific activities permitted by the Banking Regulation Act, 1949. The activities which may be performed by such banks are as follows:
1. Accept Deposits : Payments Banks can accept deposits like current deposits and savings bank deposits from individuals, small businesses, and other entities allowed by law. They must conduct their own Know Your Customer (KYC), Anti-Money Laundering (AML), and Combating the Financing of Terrorism (CFT) exercises, just like any other bank.
2. Issue ATM/Debit Cards : Although Payments Banks can issue ATM/debit cards, they cannot issue credit cards.
3. Provide Payment and Remittance Services : Payments Banks can offer payment and remittance services through various channels such as branches, ATMs, BCs, and mobile banking. This includes accepting funds and making payments through branches, BCs, and ATMs.
4. Issue Prepaid Payment Instruments (PPIs) : Payments Banks can issue Prepaid Payment Instruments as per instructions issued under the Payment and Settlement Systems (PSS) Act, 2007.
5. Offer Internet Banking : RBI permits Payments Banks to provide Internet banking services.
6. Act as Business Correspondents (BCs) : Payments Banks can function as BCs of other banks, following RBI guidelines on BCs.
7. Handle Cross-Border Remittances : Payments Banks can manage cross-border remittances for personal payments or remittances on current accounts. RBI facilitates facilities or approvals for such transactions in foreign exchange upon application.
8. Provide Other Financial Services : Payments Banks can engage in non-risk sharing simple financial services activities like distributing mutual fund units, pension products, insurance products, etc., with prior approval from RBI and compliance with sector regulator requirements.
9. Facilitate Utility Bill Payments : Payments Banks can collect utility bill payments on behalf of their customers and the general public.
However, Payment Banks are prohibited from forming subsidiaries for non-banking financial services activities. Moreover, to ensure clarity and distinguishability from other banks, they are required to include the term "Payments Bank" in their name.
At RegisterKaro, we understand the complexities and challenges involved in obtaining a Payment Bank License. That's why we're here to offer you hassle-free and quick solutions. With our team of expert professionals boasting vast experience in the field, you can rest assured that your journey towards securing a Payment Bank License will be smooth and efficient. Our affordable prices and tailor-made solutions cater to your specific needs, ensuring that you get the best value for your investment.
With the trust of over 10,000 satisfied clients who have availed of our services, we stand as industry leaders in providing expert assistance for Payment Bank License acquisition. Choosing RegisterKaro means choosing excellence, reliability, and peace of mind. Let us guide you through the intricate process of obtaining your Payment Bank License, so you can focus on what truly matters – building a successful banking venture.
What is a Payment Bank Licence?
Payment Bank License is a mandatory requirement to open a Payment Bank in India. The applicant needs to fulfil the eligibility criteria before applying for the license. The Reserve Bank of India has the authority to issue the Payment Bank License as per section 22 of the Banking Regulation Act, 1949.
Features of a Licensed Payments Bank
Licensed Payment Banks come with the following features:
1. Deposit Limit of Rs. 1 lakh : RBI has authorised Payment Banks to accept deposits up to Rs. 1 lakh only. This limit is prescribed by RBI to safeguard customer interests.
2. Debit Card Facility : Payment Banks offer both physical and virtual debit cards, enabling users to access ATMs domestically and internationally without additional charges for cash withdrawals.
3. Seamless Online Transactions : Unlike traditional banks, Payment Banks streamline money transfers and transactions through digital platforms, providing online services for fund transfers such as NEFT, IMPS, and others.
4. Convenient Payment Methods : Regardless of location, Payment Banks enable digital payments, reducing the necessity of visiting physical bank branches for cash deposits or withdrawals.
What are the Requirements to Obtain a Payment Bank License?
The following are the requirements, which need to be fulfilled before making an application for a Payments Bank Licence:
1. Paid-up equity capital : The entity which wishes to obtain the Payment Bank Licence shall have a paid-up equity capital of a minimum of Rs.100 crore.
2. Capital Adequacy Ratio : Payment Banks are required to uphold a minimum capital adequacy ratio of 15 per cent of their Risk Weighted Assets (RWAs), which may be adjusted to a higher percentage as directed by the RBI. The Tier I Capital should constitute at least 7.5 per cent of the RWAs, while Tier II Capital is capped at a maximum of 100 per cent of the total Tier I Capital. Despite not engaging in complex financial products, Payment Banks compute their Capital Adequacy Ratio according to the standardized approaches outlined by the Basel Committee.
3. Structure of Entity : The entity which wishes to obtain the Payment Bank Licence must be a Public Limited Company registered under the Companies Act, 2013
Who can Obtain a Payment Banks License?
The following persons are eligible to obtain a Payment Bank License:
1. Individuals/Professionals
2. Mobile telephone companies
3. Non-Banking Financial Companies (NBFCs)
4. Real sector cooperatives
5. Supermarket Chains
6. Public sector entities
7. Promoter or group of promoters who have a joint venture with a scheduled commercial bank
8. Non-bank prepaid payment instrument under the Payment and Settlement Systems Act, 2007
9. Corporate Business Correspondence
10. Public companies
What Information is Required for Obtaining Payment Bank Licence?
To obtain a Payments Bank License from the RBI, the following details must be provided:
1. Information of the Individual Promoter:
a. Name, Date of Birth, and Residential Status of the Promoter.
b. Parent’s Name.
c. PAN No.
d. Branch and Bank Account Details, including any Credit Facilities.
e. Experience and Areas of Expertise of the Individual Promoter.
f. Track Record of Business and Financial Worth.
2. Information of the Entity Promoting the Bank:
a. Shareholder Pattern of the Promoter Entity.
b. Memorandum and Articles of Association.
c. Financial statements from the past five years of the promoter entity.
d. Income tax returns for the last three years.
3. Information of the Individuals and Entities in the Promoter Group:
a. Names of individuals and entities.
b. Details of shareholding.
c. Management details.
d. Pictorial Organogram.
e. Total Assets of Entities.
f. Annual Reports from the previous five years of all group entities.
g. Details of Listing in Stock Exchanges.
h. PAN No., TAN No., CIN No.
i. Bank Account and Branch Details.
Business Plan Requirements for Payment Bank
Applicants seeking a Payment Bank license are required to submit project reports and business plans along with their applications. These plans must outline how the bank intends to achieve the objectives of establishing Payment Banks. The business plan provided by the applicant must be both accurate and feasible. Preference will be given to applicants proposing to establish Payment Banks with access points primarily in underdeveloped states or districts within the Central, East, and North-East regions of the country. Payment Banks must ensure a wide network of access points, especially in remote areas, either through Business Correspondents (BCs), their branches, or through networks provided by others. They are expected to employ technological solutions to expand their network and reduce costs.
If a Payment Bank strays from its stated business plan after receiving the license, the regulatory authority may take action. This could include restricting the bank's expansion, changing its management, or imposing other penalties as deemed appropriate.
Procedure to Obtain a Payment Bank License
The step-by-step process for applying for a Payment Bank License is as follows:
1. Register as a Public Limited Company : The Payment Bank must register itself as a Public Limited Company under the Companies Act, 2013.
2. Apply for License : The Payment Bank needs to apply for a license under Section 22 of the Banking Regulation Act, 1949. This application is made using Form-III, as per Rule 11 of the Banking Regulation (Companies) Rules, 1949. It should be addressed to the Chief General Manager of the Department of Banking Regulation of the RBI.
3. Initial Screening : The RBI conducts an initial screening to assess the prima facie eligibility of the applicant. Additional criteria may be applied if necessary.
4. Evaluation by External Advisory Committee (EAC) : An External Advisory Committee, comprising professionals such as Chartered Accountants, Finance Professionals, and Bankers, evaluates the applications. Discussions with the applicants may be held at this stage if required.
5. In-Principle Approval : The RBI makes the final decision to issue an in-principle approval. This approval remains valid for 18 months, during which the bank must be established.
6. Additional Conditions : If any adverse features are observed, the RBI may impose additional conditions or withdraw the in-principle approval.
Scope of Activities After Obtaining Payment Bank License
Once a Payments Bank secures its license, it's allowed to establish its outlets, including branches, Automated Teller Machines (ATMs), and Business Correspondents (BCs). These outlets can only engage in specific activities permitted by the Banking Regulation Act, 1949. The activities which may be performed by such banks are as follows:
1. Accept Deposits : Payments Banks can accept deposits like current deposits and savings bank deposits from individuals, small businesses, and other entities allowed by law. They must conduct their own Know Your Customer (KYC), Anti-Money Laundering (AML), and Combating the Financing of Terrorism (CFT) exercises, just like any other bank.
2. Issue ATM/Debit Cards : Although Payments Banks can issue ATM/debit cards, they cannot issue credit cards.
3. Provide Payment and Remittance Services : Payments Banks can offer payment and remittance services through various channels such as branches, ATMs, BCs, and mobile banking. This includes accepting funds and making payments through branches, BCs, and ATMs.
4. Issue Prepaid Payment Instruments (PPIs) : Payments Banks can issue Prepaid Payment Instruments as per instructions issued under the Payment and Settlement Systems (PSS) Act, 2007.
5. Offer Internet Banking : RBI permits Payments Banks to provide Internet banking services.
6. Act as Business Correspondents (BCs) : Payments Banks can function as BCs of other banks, following RBI guidelines on BCs.
7. Handle Cross-Border Remittances : Payments Banks can manage cross-border remittances for personal payments or remittances on current accounts. RBI facilitates facilities or approvals for such transactions in foreign exchange upon application.
8. Provide Other Financial Services : Payments Banks can engage in non-risk sharing simple financial services activities like distributing mutual fund units, pension products, insurance products, etc., with prior approval from RBI and compliance with sector regulator requirements.
9. Facilitate Utility Bill Payments : Payments Banks can collect utility bill payments on behalf of their customers and the general public.
However, Payment Banks are prohibited from forming subsidiaries for non-banking financial services activities. Moreover, to ensure clarity and distinguishability from other banks, they are required to include the term "Payments Bank" in their name.
At RegisterKaro, we understand the complexities and challenges involved in obtaining a Payment Bank License. That's why we're here to offer you hassle-free and quick solutions. With our team of expert professionals boasting vast experience in the field, you can rest assured that your journey towards securing a Payment Bank License will be smooth and efficient. Our affordable prices and tailor-made solutions cater to your specific needs, ensuring that you get the best value for your investment.
With the trust of over 10,000 satisfied clients who have availed of our services, we stand as industry leaders in providing expert assistance for Payment Bank License acquisition. Choosing RegisterKaro means choosing excellence, reliability, and peace of mind. Let us guide you through the intricate process of obtaining your Payment Bank License, so you can focus on what truly matters – building a successful banking venture.
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FAQs
How does a Payment Bank differ from a traditional bank?
Payment banks and traditional banks have these two notable distinctions:
- Deposit Limit : Payment banks accept deposits up to Rs. 1 lakh, whereas traditional banks don't have such restrictions
- Credit Services: While Payments Banks provide debit cards, they don't offer credit cards or loans.
Do Payment Banks offer interest on deposits?
Payment Banks aim for financial inclusion, primarily through savings accounts and payment services. Currently, they offer interest rates comparable to traditional banks. However, RBI guidelines prevent Payment Banks from accepting fixed or recurring deposits.
Can Payment Banks accept demand deposits?
Payment Banks are limited to accepting demand deposits, offering remittance services, internet banking, and specific services. They are not permitted to provide lending services.
What's the purpose of Payment Banks?
Payment Banks primarily aim to foster financial inclusion by providing remittance and payment services to underserved communities.
Can Payment Banks issue ATM cards?
Yes, Payment Banks can issue ATM or debit cards to customers
Do Payment Banks provide credit cards?
No, Payment Banks are not authorized to issue credit cards to customers.
Can Payment Banks offer Mutual Funds?
Yes, Payment Banks can offer simple financial products like Mutual Funds.
Can Payment Banks provide Insurance Products?
Yes, Payment Banks are permitted to offer Insurance Products.
What is the Minimum Paid-up Capital required for a Payment Bank License?
According to RBI regulations, a minimum capital of 100 crores is required to establish a Payment Bank.
Is Foreign Shareholding allowed in Payment Banks?
Yes, Foreign Shareholding is permitted in Payment Banks for Foreign Direct Investment in private banks in India.
What are some examples of Payment Banks in India?
Renowned Payment Banks in India include Airtel M Commerce Service Limited, Fino Paytech Limited, National Securities Depository Limited, Reliance Industries Limited, Distribution Services Limited, Vodafone M-Pesa Limited, Department of Posts Aditya Birla Nuvo Limited, and Paytm Payments Bank.
Can Non-Resident Indians deposit funds in Payment Banks?
No, Non-Resident Indians are not permitted to make deposits in Payment Banks.