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To begin with, the central bank will set the initial capital requirement at Rs 100 crore, compared with the Rs 50 crore the Mor panel had suggested. For computing the capital adequacy ratio, unlike full-service banks, payment banks will only factor in operational risk, and not market risk and credit risk.
However, while existing banks might be allowed to create subsidiaries for payment banks, such banks would not be allowed to undertake any other activity apart from accepting deposits and offering payment services. The payment banks would not even be allowed to undertake lending activities.
This is a departure from the principle the regulator follows at present — that an activity a bank can undertake departmentally is allowed to be undertaken as a subsidiary as well. For example, RBI has in the past five years or so allowed insurance or mutual funds to operate as subsidiaries but not granted fresh licences for opening subsidiaries for home loans or infrastructure loans.
The central bank will come out with norms for payment banks shortly. This will be the first in the list of RBI’s stated objectives of bringing niche bank licences. Most of the existing banks had received universal or full-fledged banking licences.
While non-banking financial companies will be allowed to open payment banks, mainstream NBFCs engaged in financial activities like lending and broking might find the guidelines hard to accept, as they have to exit all other activities to be eligible for payment banks.
Additionally, sources indicate, the fit-and-proper criteria will also be judged rigorously while granting licences.
Payment banks will only be involved in activities related to retail payment and remittance and will focus on unbanked areas. They have to maintain a cash reserve ratio and all their deposits will have to be invested in government securities. The maximum deposit a payment bank can take from one individual will be capped. The Mor committee had suggested the cap at Rs 50,000.
Payment banks are also aimed at catering to migrant workers in metros or Tier-I cities who need to send money to their families at their native places. These banks will also offer services like utility bill payments.
Pre-paid instrument providers are seen forming these payment banks. These entities have relaxed know-your-customer norms, while the value of transactions is capped.
The norms on payment banks will also pave the way for the country’s postal department, India Post, to enter the niche banking segment. Sources indicate the norms will allow India Post to apply for a payment bank licence.
India Post had applied for a universal bank licence when RBI invited applications in 2013. While the telecom ministry had backed India Post’s ambition to become a full-fledged bank, the finance ministry was not keen, given the government’s financial burden.
SETTING THE RULES
Likely guidelines for payment banks
- Initial capital: Rs 100 crore, double the Rs 50 crore proposed by the Mor committee
- Retail focus: Focus to be on retail payment and remittances; lending not permitted
- Deposits: All deposits have to be invested in govt bonds; deposits from each individual will be capped
- Eligibility: India Post to be eligible to apply; NBFCs might find it difficult
- Condition: To have CRR stipulations
