Overview

In the latest times, payment banks have got accessible hooks as well as amazing in their banking circle business. It is a new model introduced by the Reserve Bank of India (RBI), which accelerates transactions like a regular bank, besides issuing credit cards and lending. Payment Banks is something that has got the potential to give extensions to the Government’s financial targets, which got considered as the next big thing.

Payment Bank brings more flexibility, convenience and eases the banking life. They also offer numerous services to the consumers utilizing a secured digital platform, which helps the Government to achieve “Digital India.” Thus, it is mandatory to obtain a payment bank license to open a payment bank. You should note that, U / s 22 of the Banking Regulation Act, 1949, the Reserve Bank of India issues payment bank licenses to applicants.

Required minimum paid-up capital to get a payment bank license

As per RBI guidelines, the minimum required payable equity capital to open a payment bank and obtain a payment bank license is Rs. is. 100 crores. Accordingly, the promoter must contribute at least 40% of the equity capital paid for the first five years of the establishment. Payment for FDI in Indian private banks Foreign shareholding in banks will be allowed as per the FDI policy as amended from time to time.

Eligibility criteria

As we know it requires a minimum of Rs 100 crores. As paid-up capital, RBI has well defined a long list of promoters eligible for paid bank licenses. Applicants who qualify for the payment bank licensing process are given below. They are as follows: -

• Preventing and rescuing non-bank pre-paid payment instrument issuers, approved under the PSS Act (Payment and Settlement Systems Act), 2007
• Professionals / Individuals
• NBFC (Non-Banking Financial Company)
• Supermarket Chain
• Corporate Business Correspondent
• companies
• Mobile Telephone Companies
• Real Estate Sector Cooperative
• Public Sector Units

Permitted activities for payment bank license holder

The activities permitted for the payment bank license holder are given below: -

• Acceptance of demand deposit of Rs 1 lakh per customer.
• Issue of debit card
• payment and remittance services.
• Distribution of financial products, eg, mutual funds and insurance.
• Issue of prepaid payment instruments.
• Internet banking services.
• To act as business correspondent of another bank.
• Utility bill payment on behalf of customers

Required Documents for application.

Existing Structure

Documents and information on individual promoters: -

• Name of the promoter, residential status, date of birth, PAN No., parents’ names, branch, bank account details, and credit facilities.
• Comprehensive and detailed information on the experience and background of the individual promoter, track record of business and financial worth, his/her expertise, details of promoter’s direct and indirect interests in several entities/ industries/ companies, etc.

Documents and information on the bank promoting entity: -

• Memorandum and Articles of Association, shareholding pattern of promoter entity, financial statements of promoter entity for the last 5 years (include important economic indicators), and income tax returns for the last 3 years.

Documents and information on entities and individuals in promoter groups: -

• All entities have names of individuals and entities, management and corporate structure, description of shareholding, a pictorial organ representing the structure, sharing, and total assets of the entities.
• Submit annual report of last 5 years of all group entities.
• Organization of the names of all the entities and individuals in the promoter group (including non-financial, financial and foreign entities) with the following details: -
• Date of incorporation,
• The activity of the entity,
• Registered Office address,
• PAN Number,
• TAN Number,
• CIN Number,
• Account number,
• Income Taxation to which the entity belongs,
• Branch and its account details of the entities
• Credit regulators and amenities of the entity (registration details in the case of entities regulated by SEBI)
• Particulars of the listing (on stock exchanges) of the entities.

Proposed Structure

• Detailed information about individuals / institutions,
• 5% or more customers of the paid equity capital (shareholding arrangement) of the proposed payment bank,
• Show foreign equity participation,
• Description of proposed investors and proposed bank sources of capital

Project report

A project report showing the proposed and bank business potential, business plan, feasibility of offering any other financial services, as per RBI guidelines, and any other information which is reflected as relevant.

Some requirement

• The payment bank should be required to invest in securities issued by the government or treasury bill - a minimum of 75% of its demand deposits have a maturity period of up to 1 year; Which are recognized by RBI as eligible securities for maintenance of SLR (Statutory Liquidity Ratio).
• Payments bank should maintain a maximum of 25% in current deposits with other scheduled commercial banks for administration of their processes / operations and liquidity. This should include a minimum paid up capital of Rs 100.
• A capital adequacy leverage ratio is not less than 3% and a minimum of 15% of its risk-weighted will be maintained.
• The FDI policy for private banks should be the guiding policy for foreign shareholding.
• Payments banks will be required to follow the guidelines laid down by the RBI as they may face operational or liquidity risks related to liquidity risk management and its administration.

Regulatory Framework

The regulatory framework for a payment bank in India is as follows: -

• Reserve Bank of India, 1934;
• Companies Act, 2013;
• Banking Regulation Act, 1949;
• Foreign Exchange Management Act, 1999;
• The Payment and Settlement Systems Act, 2007;
• The Deposit Insurance and Credit Guarantee Corporation Act, 1961.
• Other laws and instructions issued by RBI, prudential regulations and other guidelines which may be applicable from time to time.

What is the range of payment bank's actions and mandatory complaints in India?

The scope of actions of a Payment Bank in India can be précised as given below:-

• Any Payment Bank can accept deposits as per the limit prescribed by RBI. The term "deposits" include Saving Bank Deposits from Individual and Current Deposits from Small-level businesses; 
• Non-resident Indians are not allowed to make any deposits in payment banks;
• A payment bank may issue a debit card or ATM;
• Payments banks are not allowed to engage in any pending activities;
• A payment bank should initiate its own CFT (Combating Financial Terrorism) Exercise and KYC (Know Your Customer) / AML (Anti Money Laundering) as any other bank;
• A payment bank is not allowed to offer loan and visa administration, even if they can provide ATM or debit notes.
• A payment bank can be involved in remittance and payment services through BC (Business Correspondent) and ATMs (automated teller machines) and mobile banking. Payment / remittance services can include acceptance of funds through branches at one end using automated teller machines (ATMs) and various channels like BC (Business Correspondent), branches and BCs and paying cash at the other end .
• As per the instructions given under the Payment and Settlement Instrument Act, 2007, the payment bank can also issue prepaid payment instruments.
• A payment bank can bargain for the offer of Internet banking services;
• According to the Reserve Bank of India (RBI) guidelines, a payment bank can also become a BC (business correspondent) of another bank: 
• Under the approval of the payment system by the Reserve Bank of India, a payment bank can act as a channel to accept 'remittances' from banks such as RTGS / IMPS / NEFT;
• A payment bank is allowed to handle cross-border remittance transactions such as remittances on current bank accounts or individual payments;
• Payments bank is not allowed to set up subsidiaries to undertake the activities of a non-banking financial company (NBFC);
• A payment bank can pay a 'utility bill' on behalf of the general public and its customers;
• With the prior approval of RBI, the payments bank is allowed to perform other non-risk sharing simple financial functions. It aspires to meet all the requirements of the sector regulator for such products.
• A payment bank is legalized to accept current deposits and investment fund bank deposits to a quantum limit from private undertakings;
• A payment bank needs to agree to the RBI (Reserve Bank of India) to take complaints on web-banking, technology risk management, cyber law, data security and electronic banking;
• A payment bank should use the term 'payment bank' to distinguish it from other banks.

Procedure

• The payment bank should be issued a license under Section 22 of the Banking Regulation Act, 1949 and should be registered as a public limited company under the Companies Act, 2013.
• Any company incorporated / established in India and wishing to start a banking business as per Rule 11 of the Banking Regulation (Companies) Rules, 1949, shall make an application for payment bank license using 'Form III' .
• The payment bank license application shall be addressed to the "Chief General Manager" of the Department of Banking Regulation, RBI.
• Initial screening of RBI will be conducted to check prima facie acceptance, and additional criteria may also be applied if required.
• An EAC (External Advisory Committee) consisting of eminent professionals like Chartered Accountants, Finance Professionals, Bankers etc. will evaluate the applications.
• The EAC (External Advisory Committee) may call for information and discuss and negotiate with applicants as it may deem fit.
• RBI will make the result in issue of in-principle approval, and will be final and concluding. Theoretical approval will be binding for 18 months. This means that the bank must establish itself within such a period.
• If any type of adverse features are detected to be issued after in-principle approval, the RBI can execute additional conditions if necessary. In addition, it may withdraw theoretical approval.

RBI guidelines

Preface and Suggestion

The Reserve Bank of India (RBI) issues licenses to run the business of payment banking and other companies which may include banking companies, as described in Sections 5 (b), and 6 (1) (a) And is defined. - (o) The Banking Regulation Act, 1949, individually. The payment bank licensing process ended with the announcement by the RBI "vide its Press Release dated April 2, 2014". It says that it will be granted "in-principle" approval to two applicants who would set up new banks in the private ventures within 18 months, only.

RBI proposes to use the learning experience from this licensing implement to revise the guidelines appropriately while pronouncing the decision to grant "in-principle" approval. It was also to move to grant licenses more frequently. Additionally, RBI would work on a policy of having various groups of "differentiated" bank licenses, which shall allow a wider pool of applicants into the banking sector.

An understanding in the discussion paper on banking structure in India and way forward on August 27, 2013 - Location banking was required in India. It was also stated that specific licensing could be a desirable step in this direction, mainly for infrastructure financing, retail banking and wholesale banking. Relying on the comments and suggestions received on the draft guidelines, the following guidelines for license payment banks have been confirmed.

Purpose

For unhealthy people there is a requirement for savings accounts and transactions. In addition, there are macro-economic benefits for the area of ​​remittances that they receive, and micro-economic benefits to recipients. Therefore, the primary objective of setting up payment banks will be to advance the financial enclosure by providing payment or remittance services for (a) small savings accounts and (b) low-income families, migrant labor workforce, small businesses, other unorganized sectors. / Institutions, and other users.

This will be enabled by enabling high volume-low value transactions in deposit and payment / remittance facilities in a sheltered and protected technology-driven environment.

Qualified Promoter

You should note that existing PPI license holders can also opt for conversion in payment banks. The current PPI issuer is not required to apply for a payment bank license, and it can continue as a 'PPI issuer' as per the guidelines issued by RBI.

A promoter/promoter group can get a "Joint Venture"With an existing listed commercial bank to set up a payment bank and obtain a license. However, to the extent permitted under Section 19 (2) of the Banking Regulation Act, 1949, scheduled commercial banks can take equity stake in a paying bank. If a government institution is required to establish a payment bank, it must first obtain significant approval from the government, and submit an application.

Money deployment

The payments bank will contribute to the 'payment and settlement system.' It will have access to the "interbank uncollateralized - call money market," "collateralized repo," and CBLO market for provisional liquidity management.

Contribution of motivators

You should note that RBI does not set a maximum shareholding limit for promoters. Nevertheless, the promoters of the payment bank will have to hold at least 40% of their paid-up equity capital for the first five years prior to the start of their business.The "scheduled commercial banks" can take an equity stake in a payments bank to the amount permitted U/s 19 (2) of the Banking Regulation Act, 1949 if the payments bank is set up as a joint-venture with equity partnership with a "scheduled commercial bank."

When the payment bank becomes systematically significant and reaches a net worth of Rs 500 crore, diversified ownership and inventory payments will become mandatory within 3 years of the bank reaching that net worth. Even now, the net worth of paying banks is less than Rs 500 crore. subject to meeting the requirements of the capital market regulator

Foreign shareholding

The Foreign Direct Investment (FDI) policy will regulate foreign shareholding in the payments bank as per private sector banks as amended from time to time. The collection of foreign investment in a private sector bank from all the grounds will be allowed as per the current FDI policy up to a maximum of 74% of the paid up capital of the bank. At least 26% of the paid up capital must be held by residents at all times. Further, the holding of individual FIIs / FPIs is less than 10% of the total paid-up capital in case of 'Foreign Institutional Investors' (FIIs) / 'Foreign Portfolio Investors' (FPIs)

.

Voting rights and transfer / acquisition of shares

It is worth noting that the voting rights of any shareholder in private sector banks are capped at 10% under Section 12 (2) of the Banking Regulation Act, 1949. In addition, this limit can be raised to 26%. By RBI guidelines. Additionally, any acquisition of paid-up share capital of 5% or more in a private sector bank would require prior approval of RBI as per Section 12B of the Act, which would also apply to payment banks in India.

Business plan

All applicants for payment bank license will be mandatory to submit their project report and business plans along with their application. The business plan for the application should know how the bank aims to achieve the objectives of setting up a payment bank in India.

Corporate Governance

• The Payments Committee should have a majority of independent directors of payment banks.
• The payments bank should follow corporate governance guidelines containing 'fit and proper' criteria for directors as remittances to RBI from time to time.

Servzone process

Please use the steps above to legally and securely integrate a payment bank license and reap the benefits as better quality sales and satisfied customers. Our servzone specialists will be at your disposal to assist you with guidance related to payment bank licensing and compliance with the smooth functioning of your banking business in India. servzone professionals will help you plan at the least cost, confirming the successful conclusion of the process.

It is advisable that an attorney with “Banking experience” The payment bank should be appointed to address the many potential pitfalls that creep within the license and understand the need in detail. Primary information will be mandatory from your end to begin the process. After providing all the information, and upon receipt of payment, the attorney will start working on your request.

Why servzone?

servzone is one of the platforms that coordinates to meet all your legal and financial needs and constantly connects you with professionals. Yes, our clients are pleased with our legal service! Due to our focus on simplifying legal requirements, they have consistently treated us highly and provide regular updates.

Our clients can track progress on our platform at all times. If you have any questions about the payment bank licensing process, our experienced representatives are just a phone call away. servzone will ensure that your communication with professionals is engaging and seamless.