The Reserve Bank of India (RBI) launched the concept of Payment Bank License. The utmost deposit amount to these payment banks is limited to INR 1 lakh for every customer; but, there are chances that the deposit limit will be increased in the future. Underpayment banks, both the savings accounts and current accounts, are functioning. The banks holding payment bank license offers services such as internet banking, mobile banking, debit cards, ATM cards, etc.
Overview of Payment Bank License
To commence a payment bank in India, a payment Bank License is mandatory. According to section 22 of the Banking Regulation Act, 1949, the Reserve Bank of India (RBI) issues a Payment bank license. Payment banks are the next big thing that has the potential to boost the government's financial inclusion target. The transactions of payments banks are facilitated by the Reserve Bank of India, just like a regular bank, but these payment banks cannot issue credit cards and lend money. Payment banks have brought easiness in banking transactions as it brings more convenience and flexibility. These banks offer several other services to the customers via a secured digital platform.
The main purpose of introducing payments banks was to enhance lower-income groups' reach to payment facilities and support small businesses. The Reserve Bank of India, with the help of payment banks, wants to lift up the transaction facilities to the remote areas. Bharti Airtel is the first payment bank established in India.
Key Features of the Payment Bank License
Payments banks are an alternate part of banks; they don't have the authority to offer credit and loan facilities; still, there are various key features of the payment bank license system.
Deposits up to INR 1 Lakh
As per the provisions of the principal Act, the payments banks can accept deposits up to a limit of INR 1 lakh. The payments banks' customers also abide by the limit of INR 1 lakh, and no one can exceed this limit.
Virtual Debit Card
The payment banks can provide both virtual and physical debit cards to the customers. The payments bank customers can use the debit card not only in domestic boundaries but also in foreign countries. Another benefit of the virtual debit card is that it does not charge on cash withdrawals.
Smooth Transactions
The payments banks have smooth transactions as they offer an online portal for receiving and sending money, unlike the traditional banks. Payment banks also give facilities of online services like IMPS, UPI, and NEFT to the customers.
Feasible Mode of Making Payment
The payment banks have made receiving and sending money very easy via digital payments. There is no need for the customer to present physically for making the payment; the customer can be anywhere and still make payment. The payments banks slowly eliminate the old way of depositing and taking out the cash only at the bank, but now there is no need for hard cash as customers can carry their money online and make payments from anywhere.
What are the Details Provided to RBI for Obtaining Payment Bank License?
The following information must be provided to the Reserve Bank of India for obtaining Payment Bank License:
Details about the Individual Promoter
Name of the promoter.
Date of birth of the promoter.
Residential Status.
Parents Name.
PAN card number.
Bank account and Branch details.
Details about credit facilities.
Areas of expertise.
Track record of Financial Worth and Business, etc.
Details about the Entity Promoting the Bank
Promoter Entity’s shareholding pattern.
Memorandum of Association.
Articles of Association.
Promoter Entity's financial statement for the past five years.
Promoter Entity's Income Tax Return (ITR) of the last three years.
Details about the Individuals and Entities of the Promoter Group
Names of Entities and Individuals.
Management details.
Shareholding details.
Pictorial Organ gram.
Entities total assets.
All the entities of the group have to submit an Annual Report of five previous years.
Stock Exchange listing details.
PAN card number.
TAN number.
Bank account and Branch details.
Procedure for Obtaining Payment Bank License
The payment banks have to get registered themselves as a Public Limited Company as per the Companies Act's provision, 2013.
According to Rule 11 of the Banking Regulation Act, 1949, any company established in India and wants to start a banking business has to make an application via Form III to obtain Payment Bank License.
The license application is to be addressed to the Chief General Manager of the Reserve Bank of India and the Department of Banking Regulations.
The RBI will conduct a preliminary screening to check if the applicant is eligible, and if needed, they will also apply.
EAC (External Advisory Committee), consisting of experienced professionals like bankers, Charted Accountants, Finance Professionals, etc. will assess the license application.
The External Advisory Committee may have discussions regarding the bank with the applicant if required.
The Reserve bank makes the final decision to issue an in-principle authorization of India, and it will be the final decision.
The RBI issued in-principle authorization will be valid for 18 months. The payments bank must be established within the prescribed period of 18 months.
The RBI has the authority to impose additional conditions if the authorities notice any adverse features, and it also can withdraw the in-principle authorization.
Under section 22 of the Banking Regulation Act of 1949, the payment banking license is issued.
Conclusion
The main purpose of introducing payments banks was to enhance lower-income groups' reach to payment facilities and support small businesses. The Reserve Bank of India, with the help of payment banks, wants to lift up the transaction facilities to the remote areas. To commence a payment bank in India, a payment Bank License is mandatory. According to section 22 of the Banking Regulation Act of 1949, the Reserve Bank of India (RBI) issues a payment bank license.
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