Payments bank- Dos and Dont’s

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India’s leading mobile carriers Bharti Airtel Ltd and Vodafone India were selected by the country’s central bank to set up payments banks aimed at allowing millions of citizen’s entrance to formal banking. Energy-to-telecoms union Reliance Industries Ltd, a joint venture of Aditya Birla Nuvo Ltd and Idea Cellular Ltd, and the country’s postal offices were also among successful applicants.

A payment bank is a non-full service slot bank in India. It is an eminent bank that will undertake only limited banking functions which are allowed as per the Banking Regulation Act of 1949. The licensed operations as payment banks could only receive deposits and offer fees. The main objective of the payment banks is to increase financial insertion by offering small saving accounts and payment remittance services to low-income households, migrant labour workforce, small businesses and other unorganised sector entities.

Dos of payments bank

  • Has to use the word ‘Payments Bank’ in its name to differentiate from other banks.
  • Accept demand deposits, i.e., current deposits, and savings bank deposits from individuals, small businesses and other similar operations.
  • To hold a maximum balance of Rs one lakh per individual customer.
  • Will be allowed to set up branches, ATMs, correspondents.
  • Allowed to issue debit cards also offer internet banking facility.
  • Can accept fees to be sent to or receive fees from multiple banks.
  • Permitted to handle cross border remittance transactions in the nature of personal payments / remittances on the current account.
  • Allowed to distribute mutual fund products, insurance products and pension products.
  • Bank can also undertake utility bill payments.
  • Can accept a large pool of money to be remitted but at the end of the day the balance should not exceed Rs one lakh.

 Don’ts of payments bank

  • No NRI deposits should be accepted.
  • Cannot issue credit card
  • Not allowed to set up subsidiaries to undertake non-banking financial services activities.
  • Lend loans
  • Other financial and non-financial services activities of the promoters should not be mixed with the working of payment banks.

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