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.

Visit:

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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Non Performing Asset (NPA)

Non Performing Asset is an advance where interest or installment of principle remains overdue for a period of more than 90 days.

Categories of NPA's:

1) Substandard Assets

An asset which has remained NPA for a period up to 12 months.

Provisioning- 10%.

2) Doubtful Asset

An asset which has remained sub-standard for a period of 12 months becomes a Doubtful Asset.

Provisioning

after 1 year- 20%
after 2 years- 30%
after 3 years- 100%

3) Loss Asset

An asset becomes loss asset where loss has been identified by the bank or internal or external auditors or RBI inspection.

Note: General Provisioning for Standard Asset is .25%.

SARFESI Act- Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act 2002.

Empowers Banks/Financial Institutions to recover their non- performing assets without the intervention of the courts.

Disclaimer- Subject to change.

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SWIFT- Society for Worldwide Interbank Financial Telecommunication

It is a financial messaging network which exchanges messages between banks and other financial institution. Majority of international interbank messages uses SWIFT.

http://www.swift.com/products_services/by_customer/banks/swift_for_banks?rdct=t

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