In the recent era, the concept of Payment Bank has received both remarkable and reachable hooks in its banking circle business. The term Payment Bank denotes a newly introduced RBI model, which had accelerated transactions, such as a regular bank, except for issuing credit cards and lending. However, to start an online Payment Bank in India, a company or an NBFC needs to acquire a Payment Bank License from the RBI.

Further, the main reason due to which the concept of Payment Bank has got much significance is the said model has the capability to give extensions to the Government’s Financial Targets. Also, it shall be noted that the concept of Demonetization had completely recast the Indian Economic System. As a result, people now rely more on digital payment portals and paperless transactions, which has ultimately given a significant boost to the E-wallets or Mobile Wallets that were earlier outcasted.

Laws Governing RBI License for Payment Banks

To open a Payment Bank in India, it is mandatory for the applicant company to obtain a Payment Bank License from RBI. Also, it’s essential for payment banks to follow the laws governing the RBI license for payment banks.

The concept of a specialised bank model was introduced by the Reserve Bank of India in the year 2013. The same was termed as Payments Bank. It shall be noted that similar to the services offered by other Banks, a Payment Bank provides a range of financial services, except for offering credit cards and facilitating loans.

Further, based on the provisions of Section 22 of the Banking Regulations Act 1949, the Reserve Bank of India will issue the Payment Bank License to the applicant company. The said license allows the applicant to carry out banking activities. The term banking activities have the same meaning as specified under the provisions of Section 5 (b) and 6 (1) (a) to (o) of the Banking Regulation Act.

Regulatory Structure of Payment Bank License

The regulatory structure of Payment Bank License includes:

• Companies Act 2013

• Banking Regulation Act 1949

• Deposit Insurance & Credit Guarantee Corporation Act 1961

• Foreign Exchange Management Act 1999

• Reserve Bank of India 1934

• Payment & Settlement System Act 2007

  
  

  
  

Objectives of Payment Bank in India

The main objective behind the introduction of Payment Bank in India was to amplify the reach and ambit of the payment facilities to small businesses and income groups. Further, the Reserve Bank of India, by way of the model of Payment Bank, wanted to increase the penetration of finances into remote areas. The first-ever Payment Bank that got established in India is the Bharti Airtel.

A comprehensive list of the Payment Banks that are operating in India are as follows:

• Aditya Birla Nuvo

• Airtel M Commerce Services

• Cholamandalam Distribution Services

• India Post Payments Bank

• Fino Paytech

• National Securities Depository LTD

• Reliance Industries

• Vodafone M-Pesa

• Paytm

• Tech Mahindra

• Sun Pharmaceuticals

  
  

  
  

Benefits of the Payment Bank License in India

• Zero Account Balance: Account holders are not required to maintain a minimum balance.

• Higher Interest Rate: The cost-saving benefit, due to operational efficiency, is passed to the customer through higher interest.

• Convenience: A wide distribution network enables retail outlets to act as banking points.

• Safe and Secure: Due to four-factor authentication, payment banks offer high security.

• Account No is same as Mobile No: This simplifies transactions for small business traders and merchants.

• Cashback and Discount Offers: Various offers and cashback incentives are provided.

• Additional Benefits: Other financial benefits apart from cashback and discounts.

  
  

  
  

Characteristics of a Payment Bank License in India

• Offers Deposit up to Rs 2 lakh: Customers can deposit up to Rs 2 lakh in compliance with RBI regulations.

• Facility of Virtual Debit Card: Both physical and virtual debit cards are offered with no extra charges on cash withdrawals.

• Smooth Transactions through Online Portal: Enables seamless digital fund transfers through services like NEFT and IMPS.

• Feasible Way of Making Payment: Digital operations eliminate the need for a physical bank visit.

  
  

Who Can Obtain a Payment Bank License in India?

• Individuals or Professionals

• Mobile Telephone Companies

• Non-Banking Financial Companies (NBFCs)

• Real Estate Sector Cooperatives

• Supermarket Chains

• Public Sector Entities

• Promoters or Groups in a Joint Venture with a Scheduled Commercial Bank

• Existing Non-bank PPIs under the Payment & Settlement Systems Act 2007

• Corporate Business Correspondents

• Public Companies

  
  

Capital Requirements to Get Payment Bank License in India

• Minimum paid-up equity of Rs 100 crore.

• Minimum Capital Adequacy Ratio (CAR) of 15% of total Risk Weighted Assets (RWA).

• Tier I Capital must be at least 7.5% of RWA.

• Tier II Capital must not exceed 100% of Tier I Capital.

  
  

Details Required for RBI Payment Bank License

Individual Partner Details:

• Name, PAN, Date of Birth, Experience

• Residential Status, Parent’s Details, Branch Details

• Current Bank Account Details, Areas of Expertise

• Past Business Track Record & Financial Worth
  
  

Entity Promoting the Bank:

• Shareholding Pattern, MOA & AOA

• Financial Statements for the past five years

• ITRs for the past three years
  
  

Common Details:

• Names of all Individual Partners and Entities

• Shareholding Pattern, Organogram, Management Details

• Assets and Liabilities, Annual Financial Reports

• Bank and Tax Details

  
  

  
  

  
  

  
  

Registration Procedure for Payment Bank License

1. Prepare Documentation: Submit business plan, financials, and KYC documents.

2. Apply with RBI: Submit an application under Section 22 of the Banking Regulation Act.

3. Approval Process: RBI examines the application and issues an in-principle approval.

4. Incorporation & Compliance: Establish the bank and adhere to RBI regulations.

5. Final License Issuance: RBI grants the final license post successful compliance.

   
   

   
   

Why Choose Fastzeal?

• Expertise in Payment Bank Licensing

• Quick and Hassle-Free Process

• Compliance with RBI Regulations

• Transparent and Cost-Effective Solutions

• Comprehensive Consultation Services