The payments banks are given the status of scheduled banks under the section 42 (6) (a) of the Reserve Bank of India Act, 1934. However, the words “Payments Bank” have to be used by the companies in their name in order to differentiate it from other banks.
The payments banks, which are licensed under section 22 of the Banking Regulation Act 1949, has to mainly accept the demand deposits and provision of payments and remittance services. A number of bodies which will govern the payments are Banking Regulation Act, 1949; Reserve Bank of India Act, 1934; Payment and Settlement Systems Act, 2007; Foreign Exchange Management Act, 1999; Deposit Insurance and Credit Guarantee Corporation Act, 1961; and other relevant statutes and directives. The guidelines issued by RBI will be reviewed from time to time.
RBI’s main objective to open payments banks is to serve the need of transaction and savings account in rural areas. In this way, both macroeconomic benefits, as well as microeconomic benefits, will be served at a broad level to its customers.
The primary objectives:
* Small savings accounts initially are restricted to holding a maximum balance of Rs. 100,000 per individual customer, which might get increased further as per RBI regulations.
* To provide payments/remittance services to migrant labour workforce, low-income households, small businesses, other unorganised sectors.
The payments bank can set up their outlets such as branches, Automated Teller Machines (ATMs), Business Correspondents (BCs), etc. which will be regulated by the Banking Regulation Act, 1949. The services which are to be considered for regulations are:
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Small deposit accounts: Demand deposits and savings bank deposits from any individuals, entities and other small firms, will be accepted. However, NRI deposits will not be accepted. The eligible deposits mobilised by the payments bank would be insured under DICGC to a holding of maximum balance of Rs. 100,000 per individual customer. The payments bank also needs to comply with its own KYC norms.
Issuance of ATM / Debit Cards: Payments banks, however, cannot issue credit cards as per the RBI guidelines as they cannot deal with lending businesses.
Payments and remittance services: These banks can use any channel for making or transferring of payments through branches, Automated Teller Machines (ATMs), Business Correspondents (BC), mobile banking and can be accessed through point of sales terminals adhering to the terms and conditions that card payments network should be authorized with debit card payments other than credit card, regulated under the PSS Act. Through payments bank app you can pay utility bill payments etc.
Cross-border remittance services: The banks can handle cross-border remittance transactions if they are in nature of personal payments/remittances on the current account. Prior approval will be taken from RBI in the application before providing such kind of services.
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Internet Banking: The RBI is also open to payments bank offering Internet banking services. The payments bank is expected to offer low-cost banking solutions. Such a bank should ensure that it has all systems enabled so that in the third party service providers, any kind of fraudulent activities if occurs, can be controlled to enable offering transactional services on the internet. The payments bank can accept remittances to be sent to or receive payments from multiple banks under a payment mechanism approved by RBI, which are RTGS / NEFT / IMPS.
Financial Services: Payments banks can further deal with the non-risk sharing simple financial services activities, including mutual fund units distribution, insurance solutions products, pension solutions products, etc adhering to terms and conditions imposed by RBI.
(Source: RBI website)