So what exactly is a payment bank?
Payment banks can accept
deposits restricted to Rs. 1 lakh per customer, and are allowed to pay
customers interest on the money that is being deposited. They can be used for
either current accounts or savings accounts. For companies that have operated
as mobile wallets (which are a type of Pre-Paid Instrument aka PPI), this is a
big step forward as it raises the funds limit, and allows interest to be paid
on the deposits, making it more attractive for users to store their money with
a Paytm or m-Pesa.
Unlike a regular
bank however, a payment bank can't loan money to people, or issue credit cards.
Also, the payment banks are only allowed to invest the money customers deposit
into government securities.
While the payment
banks can't issue credit cards, they can issue ATM and debit cards. Since many
of the 11 new license holders already operate mobile wallets, the ability to
issue an ATM card helps close the loop and makes it easier to convert virtual
money into cash, and vice versa.
This is also very
important when considered from the perspective of financial inclusion, as
someone could now fill cash into a m-Commerce bank account from Delhi, and a
relative in a small town who holds the debit card could withdraw cash from any
ATM frictionlessly, or even in a more rural location, through any point of sale
terminal with a "business correspondent", essentially an authorised
partner for the bank. It's these partners - and theoretically the small
convenience shop in a village that sells mobile recharges could be one of them
- that will serve the purpose of bank branches, though the payment banks can
set up branches if they want.
Payment banks can be
integrated with your savings bank accounts via IMPS and NEFT transfers. As
already mentioned, the payment banks ATM or debit cards will also work on all
banks' machines. Payment banks can't accept NRI deposits, which makes sense
considering the goal of financial inclusion.
What they can and can’t do
-They can’t
offer loans but can raise deposits of upto Rs. 1 lakh, and pay interest on
these 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
provide forex cards to travellers, usable again as a debit or ATM card all over
India.
-They can offer
forex services at charges lower than banks.
-They can also
offer card acceptance mechanisms to third parties such as the ‘Apple Pay.’
Who has Reserve Bank granted in-principle approval to be a
payment bank?
-Aditya Birla
Nuvo Ltd
-Airtel M
Commerce Services Ltd
-Cholamandalam
Distribution Services Ltd
-Department of
Posts
-Fino PayTech
Ltd
-National
Securities Depository Ltd
-Reliance
Industries Ltd
-Dilip Shantilal
Shanghvi
-Vijay Shekhar
Sharma
-Tech Mahindra
Ltd
-Vodafone m-pesa
Ltd
Why are they going to be a game-changer?
This is for the
first time in the history of India's banking sector that RBI is giving out
differentiated licences for specific activities. 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. The move is seen as a major step in pushing
financial inclusion in the country.
It’s a step to
redefine banking in India. The Reserve Bank expects payment banks to target
India’s migrant labourers, low-income households and small businesses, offering
savings accounts and remittance services with a low transaction cost. It hopes
payments banks will enable poorer citizens who transact only in cash to take
their first step into formal banking. It could be uneconomical for traditional
banks to open branches in every village but the mobile phones coverage is a
promising low-cost platform for quickly taking basic banking services to every
rural citizen. The innovation is also expected to accelerate India’s journey
into a cashless economy.
India’s domestic
remittance market is estimated to be about Rs. 800-900 billion and growing.
With money transfers made possible through mobile phones, a big chunk of it,
especially that of the migrant labour, could shift to this new platform.
Payment banks can also play a crucial role in implementing the government’s
direct benefit transfer scheme, where subsidies on healthcare, education and
gas are paid directly to beneficiaries’ accounts.
Also, this is
the first time since banks were nationalized, that private sector business
groups have bagged the RBI’s nod for banking services.
What has the experience been in other countries?
Payment
technologies have proved hugely popular in other developing countries. In
Kenya, the most cited success story, Vodafone’s M-Pesa is used by two in three
of adults to store money, make purchases and transfer funds to friends and
relatives.
