RBI to come out with Payment Bank soon- WHAT IS A PAYMENT BANK?

WHAT IS A PAYMENT BANK?

Shri. Nachiket Mor, Head of the Panel on Financial Inclusion of Small Businesses and Low-Income Households.

A Reserve Bank of India (RBI) panel on Financial Inclusion of small businesses and low-income households in India headed by Shri. Nachiket Mor, has recommended that a special category of banks, called Payments Banks, be set up to widen the spread of payment services and deposit products to small businesses and low-income households in Asia’s third-largest economy, where about 40% of the population still do not have access to formal financial services.

A Payment Bank will provide deposit and payment services but can't lend. Such banks will have a minimum entry capital requirement of Rs.100 crore, one-fifth of what a full-service bank requires, since they will have a near-zero risk of default. Payments banks will be required to comply with all RBI guidelines relevant for commercial banks. Existing banks should be permitted to create a payments bank as a subsidiary.

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http://www.thehindu.com/business/rbi-sets-rs100-cr-floor-capital-for-payments-small-banks/article6221623.ece


 http://www.thehindu.com/business/Economy/rbi-to-come-out-with-payment-bank-soon/article6108258.ece

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Challenges faced by Banks

• The biggest problem facing the banking industry is the increasing NPA's. When we look into NPA's we can see that the major defaulter's are MNC's and big corporates and other wealth customers who are capable of paying but are not willing to do so.
• Even though we boost of financial inclusion it remains a distant dream. In India their are thousands of villages which still don't have access to basic banking services.
• Bank's sometimes find difficulty in following KYC norms. By this they are knowingly or unknowingly promoting money laundering. The recent fines imposed by RBI is an example.
• After the global economic slowdown banks find it difficult to lend money to priority sector as the chances for loans becoming NPA is greater.
• Insufficient technology and high cost of technology up-gradation is also a challenge.

How NPA's can be minimized?

• Constant monitoring and taking corrective actions at the earliest in case of default account.
• Before granting loans ensure that proper security is available.
• Sharing information of constant defaulters.

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