Paytm Payments Bank launched

Paytm has finally rolled out its Payments Bank, which is an almost-complete banking solution offered by the company. The digital wallet and e-commerce service provider received the final license from RBI for the bank last week. With the launch, Paytm is transferring all wallets to the new Paytm Payments Bank.

Under the new banking system, wallets and accounts will be two separate entities. In order to be a part of the banking system, the user will have to open a bank account with Paytm.

What is a Payments Bank?

A Payments bank is similar to any other bank except it operates on a smaller scale. The Reserve Bank of India (RBI) introduced it in 2014 to increase the scope of financial inclusion to small savings account holders, low income households, small businesses, unorganised sector entities and migrant labour force.

Key facts on payment banks:

• Customers can deposit only up to Rs 1,00,000.
• Payments bank can issue ATM/debit cards but not credit cards.
• Payments and remittance services through various channels can be done.
• Customers will be able to buy insurance and mutual funds.
• Bank would not carry out lending activities.
• With this, the network of 1,54,000 post offices (including 1,30,000 rural post offices) will be offering banking services to the masses in the country.
• Payments banks are targeting migrant labourers, low income households, small businesses, and other unorganised sector entities.
• Initial capital required for a Payments bank is Rs 100 crore.
• Eligibility: Existing pre-paid payment instrument issuers, individuals, professionals, NBFCs, corporate business correspondents, telecom companies, super-market chains, real estate sector cooperatives that are owned and controlled by residents and public sector entities may apply.
• Promoter’s contribution initially must be 40% for the first 5 years. For foreign holding, it is up to 74% of paid-up capital, on a par with private banks.
• The banks must maintain CRR, minimum 75% of demand deposits in government bonds of up to one year and maximum 25% in current and fixed deposits with other scheduled commercial banks for operational purposes and liquidity management.