The establishment of 'Payment Banks' is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context?
- 1.Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks.
- 2.Payment Banks can issue both credit cards and debit cards.
- 3.Payment Banks cannot undertake lending activities.
Select the correct answer using the code given below.
Answer & explanation
Answer: (b) 1 and 3 only
RBI's licensing guidelines of 27 November 2014 made payments banks narrow banks: they take small deposits and offer payment and remittance services, but they may not lend. Resident-owned mobile telephone companies and supermarket chains were expressly named as eligible promoters, and only ATM/debit cards, not credit cards, are allowed.
- ✓ 1. The guidelines list mobile telephone companies and super-market chains, among others, as eligible promoters provided they are owned and controlled by residents.
- ✗ 2. A payments bank may issue ATM/debit cards, but the guidelines state plainly that it cannot issue credit cards, because a credit card is a form of lending.
- ✓ 3. The guidelines bar lending altogether; apart from CRR, at least 75 per cent of demand deposit balances must be invested in government securities or treasury bills.
Remember · Payments bank: deposits (small), remittances, debit/ATM cards, no credit cards, no loans. Promoters can be telcos, supermarket chains, PPI issuers and others owned by residents.
Sources
- RBI: Guidelines for Licensing of Payments Banks (27 November 2014) ↗ “Non-Banking Finance Companies (NBFCs), corporate 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. … ii. Issuance of ATM / Debit Cards. Payments banks, however, cannot issue credit cards. … 5. Deployment of funds The payments bank cannot undertake lending activities.”
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