Saturday, November 25, 2017

Banking Awareness : Small Finance Bank & Payment Bank



Small Finance Banks in the Private Sector
i) Objectives:
The objectives of setting up of small finance banks will be to further financial inclusion by (a) provision of savings vehicles, and (ii) supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganised sector entities, through high technology-low cost operations.
ii) Eligible promoters: Resident individuals/professionals with 10 years of experience in banking and finance; and companies and societies owned and controlled by residents will be eligible to set up small finance banks. Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) that are owned and controlled by residents can also opt for conversion into small finance banks. Promoter/promoter groups should be ‘fit and proper’ with a sound track record of professional experience or of running their businesses for at least a period of five years in order to be eligible to promote small finance banks.
iii) Scope of activities :
  1. The small finance bank shall primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.
  2. There will not be any restriction in the area of operations of small finance banks.
iv) Capital requirement: The minimum paid-up equity capital for small finance banks shall be Rs. 100 crore.
v) Promoter's contribution: The promoter's minimum initial contribution to the paid-up equity capital of such small finance bank shall at least be 40 per cent and gradually brought down to 26 per cent within 12 years from the date of commencement of business of the bank.
vi) Foreign shareholding: The foreign shareholding in the small finance bank would be as per the Foreign Direct Investment (FDI) policy for private sector banks as amended from time to time.
vii) Prudential norms :
  1. The small finance bank will be subject to all prudential norms and regulations of RBI as applicable to existing commercial banks including requirement of maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). No forbearance would be provided for complying with the statutory provisions.
  2. The small finance banks will be required to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank.
  3. At least 50 per cent of its loan portfolio should constitute loans and advances of upto Rs. 25 lakh.

Watch this Complete Article in Video Form :- All About Payment Bank,Small Finance Bank, Tagline, Headquarter, Latest News 

                        

Payments Banks in the Private Sector
i) Objectives:
The objectives of setting up of payments banks will be to further financial inclusion by providing (i) small savings accounts and (ii) payments/remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users.
ii) Eligible promoters :
  1. Existing non-bank Pre-paid Payment Instrument (PPI) issuers; and other entities such as individuals / professionals; Non-Banking Finance Companies (NBFCs), corporate Business Correspondents(BCs), mobile telephone companies, super-market chains, companies, real sector cooperatives; that are owned and controlled by residents; and public sector entities may apply to set up payments banks.
  2. A promoter/promoter group can have a joint venture with an existing scheduled commercial bank to set up a payments bank. However, scheduled commercial bank can take equity stake in a payments bank to the extent permitted under Section 19 (2) of the Banking Regulation Act, 1949.
  3. Promoter/promoter groups should be ‘fit and proper’ with a sound track record of professional experience or running their businesses for at least a period of five years in order to be eligible to promote payments banks.
iii) Scope of activities :
  1. Acceptance of demand deposits. Payments bank will initially be restricted to holding a maximum balance of Rs. 100,000 per individual customer.
  2. Issuance of ATM/debit cards. Payments banks, however, cannot issue credit cards.
  3. Payments and remittance services through various channels.
  4. BC of another bank, subject to the Reserve Bank guidelines on BCs.
  5. Distribution of non-risk sharing simple financial products like mutual fund units and insurance products, etc.
iv) Deployment of funds :
  1. The payments bank cannot undertake lending activities.
  2. Apart from amounts maintained as Cash Reserve Ratio (CRR) with the Reserve Bank on its outside demand and time liabilities, it will be required to invest minimum 75 per cent of its "demand deposit balances" in Statutory Liquidity Ratio(SLR) eligible Government securities/treasury bills with maturity up to one year and hold maximum 25 per cent in current and time/fixed deposits with other scheduled commercial banks for operational purposes and liquidity management.
v) Capital requirement :
The minimum paid-up equity capital for payments banks shall be Rs. 100 crore.
  1. The payments bank should have a leverage ratio of not less than 3 per cent, i.e., its outside liabilities should not exceed 33.33 times its net worth (paid-up capital and reserves).
vi) Promoter's contribution: The promoter's minimum initial contribution to the paid-up equity capital of such payments bank shall at least be 40 per cent for the first five years from the commencement of its business.
vii) Foreign shareholding: The foreign shareholding in the payments bank would be as per the Foreign Direct Investment (FDI) policy for private sector banks as amended from time to time.

Watch Other Videos On Banking Awareness In this series 

  1. Banking Awareness Module 1 : What is Marginal Cost Based Lending Rate (MCLR) | MCLR Vs Base Rate goo.gl/koW7Qb
  2. Banking Awareness Module 2 : About Insolvency and Bankruptcy Board Of India (IBBI) goo.gl/DSRWEG
  3. Banking Awareness Module 3 : Banking Related Acts and Important Sections Asked In Exam goo.gl/W5AeGM
  4. Banking Awareness Module 4 : About Small Finance Bank & Payment Bank goo.gl/y7rxbw
  5. Banking Awareness Module 5 : About Priority Sector Lending and Important Questions goo.gl/8AkgjP