Bharti’s payments bank unit gets final RBI nod

Bharti Airtel’s payments bank venture — Airtel M Commerce Services Ltd. — has become the first entity to receive final approval from the Reserve Bank of India (RBI) to start a payments bank.

Background:

In August last year, the banking regulator granted in-principle licences to 11 entities to start payments banks.

• The ‘in-principle’ approval was valid for 18 months, during which time the applicants were asked by RBI to comply with the licensing norms.
• Most of the players who received the payments licences are yet to apply for the final licences.

All about Payment Banks:

Payment Bank is a step towards financial inclusion.

• Capital requirement: The minimum paid-up equity capital for payments banks is Rs. 100 crore.
• The payments bank should have a leverage ratio of not less than 3%, i.e., its outside liabilities should not exceed 33.33 times its net worth (paid-up capital and reserves).
• Promoter’s contribution: The promoter’s minimum initial contribution to the paid-up equity capital of such payments bank shall at least be 40% for the first five years from the commencement of its business.
• Foreign shareholding: The foreign shareholding in the payments bank would be as per the Foreign Direct Investment (FDI) policy for private sector banks as amended from time to time.
• Apart from amounts maintained as Cash Reserve Ratio (CRR) with the Reserve Bank on its outside demand and time liabilities, it will be required to invest minimum 75% of its “demand deposit balances” in Statutory Liquidity Ratio(SLR) eligible Government securities/treasury bills with maturity up to one year and hold maximum 25% in current and time/fixed deposits with other scheduled commercial banks for operational purposes and liquidity management.

What are the scopes of activities of Payment Banks?

• Payments banks will mainly deal in remittance services and accept deposits of up to Rs 1 lakh.
• They will not lend to customers and will have to deploy their funds in government papers and bank deposits.
• The promoter’s minimum initial contribution to equity capital will have to be at least 40% for the first five years.
• They can accept demand deposits.
• Payments bank will initially be restricted to holding a maximum balance of Rs. 100,000 per individual customer.
• Can issue ATM/debit cards but not credit cards.
• Can carry out payments and remittance services through various channels.