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

Read More

Balance of Trade(BoT) v/s Balance of Payment(BoP)

Basis of Difference	Balance of Trade(BoT)	Balance of Payment(BoP)
1. Definition	The difference between the value of goods and services exported out of a country and the value of goods and services imported into the country.	Flow of cash between domestic country and all other foreign countries. It includes not only import and export of goods and services but also includes financial capital transfers.
2. How is it calculated?	BoT= Net earnings on exports – Net payment made for imports.	BoP= BoT + Net earnings on foreign investment + Cash Transfers + Capital Account. OR BoP= Current Account + Capital Account
3. When is it considered as favorable or unfavorable?	·         If export is more than import, at that time, BoT will be favorable. ·         If import is more than export, at that time, BoT will be unfavorable.	·         BoP will be favorable, if the country has surplus in current account for paying all past loans in the capital account. ·         BoP will be unfavorable if the country has current account deficit and it took more loan from foreigners.
4. Solution of being unfavorable?	To Buy goods from domestic market as far as possible.	To stop or reduce taking loans from foreign countries.

Read More

Role of Aadhar in Banking System

• Unique Identification Authority of India (UIDAI) established by the Government of India is implementing the Aadhar scheme.
• Its objective is to implement Multipurpose National Identification Card or Unique Identification Card (UID Card)
• Head, Shri. Vijay S Madan (as on April 2014).
• Budget Rs 3,000 Crore.
• Objective to cover 60 Crore residents by 2014.
• Unique 12 digit number for every resident of India.
• Aadhar is used to prove identity not citizenship.
• Large number of residents, who currently don't have any identity documents and are therefore excluded from beneficiary list can also get an identity.

 Aadhar Enabled Payment System (AePS)

• Indian payment system developed by National Payment Corporation of India (NPCI) based on unique identification number. 
• The system allows an Aadhar holder to carry out financial transactions on a micro ATM provided by banking correspondence.
• Public Sector Banks already started entering MOU with UIDAI to act as Registrars for AADHAR project.
• Major constrains faced by the banks while opening of account is the absence of valid identity and address proof of the prospective customers.
• Aadhar number may be treated as substitute for KYC compliance which enables the banks to open accounts with a greater speed and accuracy.

Read More