In what is a significant development for the telecom, digital payments and retail industries, and especially businesses like Airtel Money, Itz Cash, OxiCash, Paytm, MobiKwik, and several other semi closed wallet companies, the Reserve Bank of India has released Draft Guidelines for “Licensing of Payments Banks” in India. Suggestions and comments have to be sent in by August 28th 2014, to cgmicdbodco@rbi.org.in. Once finalized, this might to be a precursor to the winding down of the Prepaid Payment Instruments license, since the Nachiket Mor committee, in January 2014, had pointed towards difficulties being faced by the Pre-paid Payment Instruments Issuers (PPI issuers), "and the underlying prudential concerns associated with this model". It has recommended that the existing and new PPI issuer applicants should instead be required to apply for a Payments Bank licence or become Business Correspondents (BCs). This means that, in all probability, most PPI licensees will look to apply for a Payment Banks license. Notes from the draft guidelines: - Objective: to enable (i) small savings accounts and (ii) payments / remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users. - Eligibility: "The entities eligible to set up a Payments Bank include existing non-bank Pre-paid Instrument Issuers (PPIs), Non-Banking Finance Companies (NBFCs), corporate Business Correspondents, mobile telephone companies, super-market chains, companies, real sector cooperatives, and public sector entities." Even banks can take equity stake in a Payments Bank to the extent permitted under Section 19 (2) of the Banking Regulation Act, 1949. - Minimum paid up…
