Supermarket chains, mobile phone companies and housing cooperatives are among the organisations which the Reserve Bank of India (RBI) is now willing to recognise as “payments banks”.
In its draft rules released on Thursday, the RBI said, “Entities eligible to set up a payments bank include existing non-bank pre-paid instrument issuers (credit card companies), non-banking finance companies, corporate business correspondents, mobile telephone companies, supermarket chains, companies, real sector cooperatives and public sector entities”.
For small banks “any resident individual with 10 years of experience in banking and finance, companies and societies, NBFCs, microfinance institutions and local area banks can apply”.
The minimum paid up capital requirement of both the banks has been fixed at Rs 100 crore, of which the promoters’ initial minimum contribution will be at least 40 per cent, to be locked in for a period of five years. The shareholding of the promoters should be brought down to 40 per cent in three years and 30 per cent in 10 years.
The RBI’s invitation to set up such limited banks promises to change the banking landscape in India. While the “payments banks” will be allowed to take current and savings deposits, they cannot lend to any private parties.
The funds mobilised by the banks will be invested only in government securities. Since they cannot lend, they will not be in competition with the national-level banks.
To distinguish them from the full service banks, their names must include the words “payments bank”. Anybody can operate an account of up to Rs 1 lakh in these banks and send remittances from these accounts, like money transfer, or use them to pay their bills.
Any private or public sector company with largescale daily cash transactions could take up the offer. The possible contenders could include India Post, Big Bazaar, Reliance Retail, Vodafone, Bharti Telecom, BSES and NDPL. The RBI will now be able to issue a number of such licences without compromising the financial security of the banking system.
The proposed banks are part of the RBI’s plan to make the financial landscape more varied, as the existing national-level banks differ little from each other in terms of the products they offer. It also relieves the RBI of the pressure to issue more national-level bank licences. Since the time the Finance Ministry announced plans to issue additional bank licences in 2011, 26 corporate groups, NGOs and public sector companies have lined up for them.
When RBI Governor Raghuram Rajan handed out two licences in April, he promised to come up with an offer to set up differentiated banks. Abroad, these kind of banks offer a large number of retail services to customers, including encashing of cheques.