RBI draft guidelines make even mobile firms eligible to run payment banks

The Reserve Bank of India (RBI) on Thursday issued draft guidelines that make all and sundry, including telemarketing companies and super-market chains eligible to set up payment banks or a small bank.

''Existing non-bank pre-paid instrument issuers (PPIs), non-banking finance companies (NBFCs), corporate BCs, mobile telephone companies, super-market chains, companies, real sector cooperatives, and public sector entities are eligible to set up a payments bank,'' according to notification issued by the RBI.

However, for grant of licence, the eligible entities should fulfill the ''fit and proper'' criteria, which RBI said, would be assessed on the basis of their past record of sound credentials and integrity, financial soundness and successful track record of at least five years in running the businesses.

RBI has prescribed the minimum paid-up capital required for both categories of bank licences at Rs100 crore, with the promoter contributing at least 40 per cent of the initial capital.

Shareholding of the promoters should be brought down to 40 per cent within three years, 30 per cent within a period of 10 years, and to 26 per cent within 12 years from the date of commencement of business of the bank.

RBI said both payment banks and small banks are ''niche'' or ''differentiated'' banks, with the common objective of furthering financial inclusion.

Small banks will provide a whole suite of basic banking products such as deposits and supply of credit, although in a limited area of operation.

Payment banks, on the other hand, will provide a limited range of products such as acceptance of demand deposits and remittances of funds, but will have a widespread network of access points particularly to remote areas, either through their own branch network or through Business Correspondents (BCs) or through networks provided by others.

RBI had, in April, granted the first two bank licences in a decade to new banking entities and had promised to move towards granting bank licences more regularly under a new policy for "differentiated" bank permits.

The central bank also had indicated that going forward it would use the learning experience from this licensing exercise to revise the guidelines appropriately and move to grant ''differentiated'' bank licences more regularly.

RBI said it would make suitable changes to the current regulations and put in place a structure for on-tap authorisation of universal banks in the private sector in the current financial year itself.

Small banks and other differentiated banks serving niche interests, local area banks, payment banks etc are expected to meet credit and remittance needs of small businesses, unorganised sector, low-income households, farmers and migrant work force, RBI stated.

RBI has sought views and comments on the draft guidelines from all interested parties and general public, latest by 28 August 2014.