Payment Bank Of India : Check List, Role, Functions And Headquarters In India
Nov 07 2023
Payment Bank Of India: Payments banks are like other banks introduced by the Reserve Bank of India (RBI) for the Indian Banking sector. The main aim of Payment Banks is to provide financial requirements for small businesses, low income households, migrant workers, and the unorganized sectors.
In this article, we have provided the Payment Bank meaning, the number of Payment Banks in India, the role of Payment Banks in India, the functions of Payment Banks in India, the Performance of Payment Banks in India, example of Payment Banks in India, Payments Bank Capital, largest Payment Bank in India, top Payments Bank in India, first Payment Bank in India, and list of Payment Banks in India and their headquarters.
Candidates who are preparing for the upcoming competitive examinations can make use of this article to know the complete information about the Payment Banks in India. Let us discuss the list of Payments Banks in India in detail.
What is Payment Banks in India?
Payments Banks are financial institutions in India that operate on a smaller and more restricted scale. Payment Banks provide basic banking services to unbanked or underbanked people. Payment banks perform most of the banking operations but cannot advance loans or issue credit cards. Payment Bank of India does not involve Credit risk.
Can Payment Banks issue Credit cards? No, Payment Banks can't issue credit cards. They can issue only ATM and Debit cards.
History of Payment Banks in India
In September 2013, the Reserve Bank of India (RBI) set up a committee to study how financial services help low income households and small businesses. The committee was headed by Dr. Nachiket Mor. He focused on unbanked people who need basic banking services and submitted a report in January 2014. The report submitted by Dr. Nachiket Mor recommends the introduction of Payment Banks. Later in November 2014, RBI issued the guidelines for Payment Banks.
RBI created a framework for licensing small banks and other differentiated banks. Differentiated banks serving niche interests, local area banks, payment banks, etc. are made to meet the credit and remittance needs of small businesses, unorganized sectors, low income households, farmers, and the migrant workforce. The introduction of Payments Bank plays a major role in the Indian Financial sector.
Guidelines for Payment Banks
Here we have provided the licensing guidelines for Payments Banks and the payments bank license details.
The Payments Bank in India is registered as a public limited company under the Companies Act, 2013. These Payment Banks in India are licensed with certain conditions under Section 22 of the Banking Regulation Act, of 1949. The conditions include the acceptance of demand deposits and the provision of payments and remittance services. Payments Banks in India are governed by the provisions of the Banking Regulation Act, 1949; Reserve Bank of India Act, 1934; Foreign Exchange Management Act, 1999; Payment and Settlement Systems Act, 2007; Deposit Insurance and Credit Guarantee Corporation Act, 1961. The Payments Bank receives scheduled bank status when they commence their operations.
First Payment Bank in India
Airtel Payment Bank is the first Payment Bank in India. It was set up in January 2017 by Bharti Airtel, India's largest telecom provider. This helps in the cashless revolution as indicated by the Government of India. The main aim of Airtel Payment Bank is to give every Indian an equal, effective, and trustworthy banking experience.
Objectives of Payment Banks in India
The underserved population needs transitions and saving accounts. Remittances have both macroeconomic benefits for the country receiving them and microeconomic benefits for the recipients. Higher transaction costs of making remittances diminish these benefits.
Therefore, the primary Objectives of Payment Banks in India are as follows,
- Payments Bank will improve financial inclusion by providing small savings accounts, and payments/remittance services to the migrant labor workforce, low income households, small businesses, and other unorganized sector entities.
- This is made by enabling high volume and low value transactions in deposits and payments or remittance services with a secured technology.
Features of Payment Banks
The features of Payments Banks include the following facts,
- Payments Bank accepts demand deposits.
- Payments Banks will initially restrict to hold a maximum balance of INR 100,000 per individual customer.
- Payment Banks issue ATM and Debit cards but cannot issue Credit cards.
- Payments Bank offers savings accounts, current accounts, and mobile banking services.
- Payments Banks can choose to become a BC of another bank, subject to the RBI guidelines on Business Correspondents (BCs).
- Payments Banks offer payments and remittance services through various channels.
- Payments Banks distribute non risk sharing simple financial products like mutual fund units and insurance products, etc.
Payment Bank Eligibility
Here we have provided the eligibility details of the Payment Bank like capital requirements and eligible promoters.
Capital Requirement: Even though Payments Bank will not have credit and market risks, it will have operational risks. So a certain amount of capital is required to buffer against the operational risk and also used for the creation of fixed assets. Therefore, Payments Bank has the minimum paid up capital of Rs. 100 crore.
Payment banks are required to maintain a minimum capital adequacy ratio of 15 percent of their risk weighted assets (RWA) on a continuous basis. Capital of Tier I should be at least 7.5 percent of RWAs. Capital of Tier II should be limited to a maximum of 100 percent of total Tier I capital.
Eligible Promoters: The eligible promoters for the Payments Bank are discussed below.
- Non Bank Prepaid Payment Instrument (PPI) issuers
- Individuals or Professionals
- Non Banking Finance Companies (NBFC)
- Corporate Business Correspondents (BCs)
- Public Sector entities can apply to set up Payments Bank.
- A promoter can have a tie up with an existing scheduled commercial bank to set up Payments Bank.
- Under the Banking Regulation Act, of 1949, Scheduled Commercial Banks can take an equity stake in the Payments Bank.
Significance of Payment Bank
Let us discuss the significance of Payments Bank in detail.
- Payments Banks operate on a smaller scale without involving any credit risk.
- Payments Bank reaches customers mainly through smartphones.
- Payments Bank provides domestic help to small vendors through the smartphone without paying in cash.
- This increases financial services and helps in financial inclusion.
- Payments Bank reduces poverty by spreading Banking services to the underbanked.
- This also expands the formal financial system and rural banking.
- Payments Bank provides a variety of services and increases the money flow in the banking system.
- Payments banks help in transacting low volume of money to high volume.
- Payment Bank acts as a substitute for Commercial Banks.
List of Payment Banks in India and their Headquarters
Here we have provided the list of Payment Banks in India and their Headquarters.
List of Payment Banks in India
Payment Banks Name
Airtel Payments Bank Limited
India Post Payments Bank Limited
Fino Payments Bank Limited
Paytm Payments Bank Limited
Jio Payments Bank Limited
NSDL Payments Bank Limited
Payment Banks in India: FAQs
Q. How many Payment Banks in India in 2023?
A. In 2023, there are 6 Payment Banks in India.
Q. Can Payment Banks issue Debit cards?
A. Yes, Payment Banks can issue Debit cards.
Q. Name the 1st Payment Bank in India?
A. Airtel Payment Bank is the first Payment Bank in India.
Q. What is Payment Bank in India?
A. Payments Banks are financial institutions in India that operate on a smaller and more restricted scale. Payment Banks provide basic banking services to unbanked or underbanked people.
Q. Details of Payment Bank established year.
A. Payment Bank was established in the year 2014.
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