Paving the way to bring in cash — kept in steel boxes at home in rural areas, inside the shoes of a migrant labourer in a mega city and other such ingenious storage spaces – into the formal banking system, the RBI on Thursday released the final set of guidelines for payments banks.
The payments banks will be allowed to accept savings deposits primarily from the un-banked and under-banked population up to a maximum of ₹1 lakh an individual customer.
They will also be allowed to issue ATM/debit cards, remit money from one account to another, a move that should benefit migrant labourers. However, much will depend on the transaction fee charged for such transfers. “The objectives of setting up of payments banks will be to further financial inclusion by providing small savings accounts and payments/remittance services to [the] migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users,” the RBI said. Such banks will be allowed distribute non-risk sharing simple financial products like mutual fund units and insurance products. They will also be allowed to become a business correspondent of another bank.
Off limits Payments bank will, however, not be allowed to loan money. The RBI has proposed setting up small finance banks for lending to small businesses and consumers.
To protect depositors, the RBI has mandated that payments banks will be required to invest a minimum 75 per cent of the deposits collected from the public in government securities with up to one year maturity. They will be allowed to hold a maximum of 25 per cent in current and time/fixed deposits with other scheduled commercial banks for operational purposes and liquidity management. No other market investment will be allowed. The RBI said that existing non-bank Pre-paid Payment Instrument (PPI) issuers; other entities such as individuals / professionals; Non-Banking Finance Companies (NBFCs), corporate Business Correspondents (BCs), mobile telephone companies, super-market chains, companies; owned and controlled by residents; and public sector entities can apply to set up payments banks.