On a first glance the new guidelines for setting up a payment bank by the Reserve Bank of India seem a lot more friendlier. The most significant changes being in the norms for the way funds can be deployed and promoter holding. Our overview of the final Payments Banks guidelines is here. Here’s what changed in the new guidelines, as compared to the draft guidelines released a few months ago.
1. Promoter Shareholding: The RBI earlier had said that companies looking to set up a payments bank should have a minimum paid up capital of Rs 100 crore, of which the promoters’ initial minimum contribution will be at least 40%, to be locked in for a period of five years and gradually brought down to 26% over 12 years from the date of commencement of the bank. In the final guidelines, the promoters no longer have to bring down their shareholding.
2. Deployment of funds:
Payments banks will not be allowed to lend money. However they will have to invest minimum 75% of its deposit balances in Statutory Liquidity Ratio(SLR) eligible Government securities/treasury bills with maturity up to one year and hold maximum 25% in current and time/fixed deposits with other scheduled commercial banks for operational purposes and liquidity management. Earlier the RBI had suggested that 100% of the fixed and time deposits of payments banks be invested in government securities.
3. Scope of activities
- Payments banks will initially be restricted to holding a maximum balance of Rs 1,00,000 per individual customer. The RBI increased the scope of this rule and said that they could accept a large pool of money to be remitted to a number of accounts provided at the end of the day the balance does not exceed Rs. 100,000. This allows money to be deposited for large transactions, or for disbursement to multiple entities.
- Payment banks are also not allowed to to accept NRI deposits but they will allow them to handle cross border remittance transactions in the nature of personal payments / remittances on the current account. Undertaking such transactions in foreign exchange will be enabled by RBI on an application made to it.
- Payments banks can undertake other non-risk sharing simple financial services activities, not requiring any commitment of their own funds, such as distribution of mutual fund units, insurance products, pension products, etc.
4. Leverage ratio requirements: The payments bank should have a leverage ratio of not less than 3%, i.e., its outside liabilities should not exceed 33.33 times its net worth (paid-up capital and reserves). The earlier guidelines had stated that the leverage ratio of not less than 5%.
Listing on the bourses: The RBI had not mentioned in its draft guidelines the requirements for payments banks to list on the stock exchanges. It now says that payments banks whose net worth exceeds Rs 500 crore, listing will be mandatory and they will be known as systemically important. Payments banks with a net worth less than Rs 500 crore will also be allowed to list on the stock exchanges provided that they conform to the capital markets regulator’s norms.
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