RBI gives 11 entities green signal to open payments bank

The Reserve Bank of India (RBI) allowed 11 business houses, including leading business houses in the country to start payments banks on August 19,2015. RBI issued scrutinised all 41 applicants and selected them after applying criteria. It approved 11 entities out of them within a period of one year after filing application which is quite faster compared to universal banking licences took four years. It is for the first time in the history of India's banking sector that RBI gave differentiated licences for undertaking specific activities.

The complete list of entities as Reliance Industries, Aditya Birla Nuvo,Vodafone,Bharti Airtel,Department of Posts,Vijay Shekhar Sharma the CEO of One Communications, which runs PayTM),Cholamandalam Distribution Services,Tech Mahindra,National Securities Depository Ltd, Fino PayTech, Sun Pharma promoter Dilip Shanghvi.

Through the licensed services companies can accept demand deposits from individuals, small businesses and other entities while they can not accept NRI deposits.They can hold a balance of up to Rs 1 lakh per individual. RBI allows them to set up branches, ATMs, correspondents; issue debit cards; offer internet banking. RBI does not allowed them to issue credit cards. They can accept remittances to be sent to multiple banks, or receive remittances from them.They will also distribute mutual fund products, insurance products and pension products; undertake utility bill payments. They cannot setup subsidiaries to undertake non-banking financial services activities. They also cannot offer other financial or non-financial services of promoters along with payments bank services.

The new payment bank entities are required to have an initial capital of Rs 100 crore each. Further they will have to start operations within 18 months. The promoter's minimum initial contribution to equity capital will have to be at least 40 per cent for the first five years.

The existing banks may lose some business though some of the bigger ones have launched wallets and other app based functions. The companies that provide wallet services such as Oxigen, Itz Cash could also face pressure.

The government is working for direct repayment of subsidy on various schemes to the bank account of customer. Therefore the poor section of the country who don't have a bank account would get benefit from the payment banks. The reach of payment bank to wide rural areas faster as major telecom operators got nod for the payment bank.

RBI is expected to come out with a second set of such licences for small finance banks and the process for those is in its final stage. RBI is likely to issue the small finace bank licences next month. It has already received 72 applications for small finance banks.