A Reserve Bank of India (RBI) internal working group recommended that payments banks (PB) be allowed to convert to small finance banks (SFBs) after a period of three years of operations, the regulator said in a statement on November 20. This is a relaxation of norms set by the RBI in its on-tap licensing guidelines for SFBs, which stated that PBs could convert after completing five years of operations. The idea for PBs stems from an RBI discussion paper which stated that a differentiated licensing regime could brought in to develop and nurture specialised banks in niche areas. Thereafter, in 2014 the Nachiket Mor committee recommended that PBs be set up primarily to provide payment services and deposit products to small businesses and low-income households across the country. In 2015, the RBI gave in-principle approval to 11 entities to set up a PB. However, five years later only six of these entities continue to operate as PBs, including Paytm Payments Bank, Airtel Payments Bank, India Post Payments Bank, Fino Payments Bank, Jio Payments Bank and NSDL Payments Bank. While the minimum paid-up equity capital for PBs was fixed at ₹100 crore, the working group says that for converting to an SFB the PB must reach the ₹200 crore net-worth requirement "within 18 months of ‘in principle’ approval or date of commencement of operations, whichever is earlier." Further, the working group also recommended that SFBs and PBs should list equity shares on the stock exchanges within six years from the date…
