Does your bank have minimum balance requirement and charge penalty? Does your bank charge for transactions? Payment banks can be the answer to traditional banking services.
In India, mobiles have spread across all corners, including places where there are no electricity. Payment banks offer only mobile services and are paperless and this will appeal to all the unbanked in the country.
What are Payment Banks?
Payment banks are initiated by RBI on the motive to improve banking services in rural areas of India where no normal bank branches are available. A major difference between a payment bank and normal bank is, payment banks aren’t authorised by RBI to participate in lending activities like normal banks do.
What Services are offered by Payment Banks?
- They can accept deposits of upto Rs. 1 lakh, and pay interest on balances just like a savings bank account does.
- They can enable transfers and remittances through a mobile phone.
- They can offer services such as automatic payments of bills, and purchases in cashless, chequeless transactions through a phone.
- They can issue debit cards and ATM cards usable on ATM networks of all banks.
- They can transfer money directly to bank accounts at nearly no cost being a part of the gateway that connects banks.
- They can offer forex services at charges lower than banks.
- They can also offer card acceptance mechanisms to third parties such as ‘Apple Pay.’
What are the basic requirements of a Payment Banks?
On 23rd September 2013, Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, headed by Nachiket Mor, was formed by the RBI. On 27th November 2014, RBI released the final guidelines for payment banks. Regulations for payment banks are as follows:
- Minimum capital requirement is Rs. 1000 million.
- For initial period of five years, promoters stake should be at least 40%. FDI investments in payment banks would be allowed as per the rules for FDI in private banks in India.
- Any acquisitions by payment banks which is more than 5% of total stake needs RBI approval.
- 25% of its branches must be in the unbanked rural areas. Payment banks are not to allowed issue credit cards or indulge in any kind of lending activities.
- The deposits in payment banks are capped at Rs 0.1 million or Rs. 1 lakh per customer.
RBI has given in-principle licenses to eleven entities to launch payment bank services.
Out of these eleven licensed payment banks, three have surrendered licenses, Cholamandalam Distribution Services, Sun Pharmaceuticals and Tech Mahindra.
In- principle license is valid for a tenure of 18 months, in this specified tenure payment banks are required to fulfil the guidelines given by RBI. In case of successfully completion of guidelines in the stipulated period then RBI would grant full licenses to payment banks, which would allow them to carry normal banking activities other than lending.
One of the eleven in-principle licensed payment banks, Airtel M- Commerce Service has rolled out pilot services in Rajasthan. It is India’s first payment bank service provider and is the subsidiary of Bharti Enterprises. Company has launched their service in Rajasthan by opening 6000 Airtel retail stores on 23rd November 2016.
Key features of Airtel Payment Bank:
- Airtel is paying 7.25% per year on saving account for its customers.
- Aside from the retail store, if an Airtel customer has a smartphone, she will be able to access her account through the Airtel Money app. Customers will be able to check the balance, or transfer money. This can also be done by sending short messages via SMS if they have a basic feature phone.
- Airtel payment bank works on completely paperless mode, account is opened after a paperless eKYC and is authenticated with fingerprint of the customer. Airtel telecom customer can keep her Airtel mobile number as a bank account number.
All the Bharti Airtel retail outlets are enabled with Airtel payment banks, if a customer wants to open a bank account in Airtel payment bank, she needs to visit a Bharti Airtel retail store.
Airtel payment bank has also launched an offer in which Bharti Airtel customers can transfer money from their bank account to any other bank account or to another Bharti Airtel customer for free of cost.
Taking advantage of the government’s demonetisation move, Airtel payment bank has attracted 10,000 new customers in two days in Rajasthan.
Click here to read our article on how e-wallets are gaining from demonetisation.