In order to expand banking services to more people and small businesses On Thursday, RBI has issued final guidelines for companies seeking to convert themselves into small finance or payment banks.
Under the eligibility criteria, RBI has included Telecom companies, supermarket chains, individuals, mobile companies, business correspondents, PSU companies, real sector cooperatives as promoters of Payments Banks, while non-banking finance companies (NBFCs), Micro Finance Institutions (MFIs) and local area banks can convert into Small Finance Banks.
RBI said that promoter can also choose to have a joint venture with an existing scheduled commercial bank to set up a payments bank but they must have experience for running the business for 5 years. These banks can accept deposit only up to INR 1 lakh per individual, can offer savings accounts, payments/remittance services, ATM/debit cards, and can also distribute financial products like mutual funds and insurance but not credit cards. However, RBI has made it clear that Payment banks can’t undertake lending activities.
The small banks can accept deposits and remittances and lending to unserved and underserved sections including small business units but can’t provide loans. According to RBI guidelines, The banks must maintain cash reserve ratio (CRR) and should keep 75 per cent of its “demand deposit balances” in Statutory Liquidity Ratio(SLR) and need to hold maximum 25 percent as deposits with other scheduled commercial banks.
The minimum paid-up equity capital for payments banks is INR 100 crore and should have a leverage ratio of not less than 3 per cent. Liabilities should not exceed 33.33 times its net worth the promoters must hold 40 percent of equity for the first 5 years.
Moreover, the guidelines say that the foreign shareholding in the payments bank would be as per the Foreign Direct Investment (FDI) policy for private sector banks and they must have a high powered Customer Grievances Cell to handle customer complaints.
For licenses in both categories, companies will have to apply by January 16, 2015 and RBI would consider more applications at a later stage.
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