The document discusses payment banks in India. Payment banks will help further financial inclusion by providing small savings accounts and payment/remittance services. They can accept deposits up to Rs. 1 lakh and enable digital payments and money transfers through mobile phones. Eleven firms have been granted licenses to start payment banks, including telecom and retail companies. Payment banks have the potential to transform financial services access for underserved populations by leveraging technology and existing customer bases.

1. PAYMENT BANKS : REASON
AND EFFECT
Presented by:- Mukesh & Suresh
B.Com Final year
DEPARTMENT OF COMMERCE AND MANAGEMENT SCIENCE
NSCB COLLEGE,SAMBALPUR,ODISHA,INDIA
Guided by:- Sir Priyabrata Panda

2. TOPIC OUTLINE
 INTRODUCTION
 OBJECTIVE OF STUDY
 RELEVANCE OF STUDY
 DATA COLLECTION
 NEED OF PAYMENT BANK IN INDIA.
 FUNCTIONS OF PAYMENT BANKS
 OTHER ASPECTS
 SELECTED PROMOTERS FOR PAYMENT BANKS:
 TIMELINES OF PAYMENT BANKS
 SUMMERYAND FINDINGS:
 CONCLUSION
 REFFERENCE:

3. • Indian economy is experiencing with a new banking structure by the
emergence of two new banking concepts i.e. payment bank and small
finance bank. RBI has already given its nod to the licence of payment
banks. The core objective of setting up of payments banks will be to further
financial inclusion by providing small savings accounts and
payments/remittance services to migrant labour workforce, low income
households, small businesses, other unorganised sector entities and other
users. On the other hand small finance bank may come out from the
pipeline in near future with an objective to supply of credit to small
business unit, small and marginal farmers, micro and small industries, and
other unorganised sector through high technology-low cost operations.

4. • The new banks which are expected to reach
customers mainly through their mobile phones
rather than traditional bank branches. One could
make payments to the milk men and domestic
help through his mobile rather than going to the
bank, withdrawing cash and then handing it over
to them.
• In less than 10 years, every Indian will have a
bank account. Payment banks are the key
enablers.

5. OBJECTIVE OF STUDY
The study is conducted to reach the
following two objectives.
• To analyse the functions of payment banks.
• To study its effect on Indian economy.

6. RELEVANCE OF STUDY
After nationalisation of banks, for the first time
private firms is allowed in banking sector.
Whether to allow private companies in
banking business is itself a debate. This study
focuses on the working of payment banks in
pros and cons. This new concepts need to be
diagnosed in toto.

7. DATA COLLECTION
Data is collected from secondary sources.
From different journal, magazine, news paper,
private and government websites like
rbi.org.in, business-standard.com, ndtv.com,
economictimes.com etc. are searched.

8. NEED OF PAYMENT BANK IN
INDIA
The underlying objective is to use these new
banks to push for greater financial inclusion.
Currently, almost 50% of Indians don’t have a
bank account and only about 30,000 of India’s
5.94 lakh villages have a commercial bank
branch. Much of this imbalance has to do with
the inability of bigger banks to reach into the
hinterland.

9. FUNCTIONS OF PAYMENT BANKS
•They can’t offer loans but can raise deposits of
upto Rs. 1 lakh, and pay interest on these
balances just like a savings bank account does.
•They can enable transfers and remittances
through a mobile phone.
•They can offer services such as automatic
payments of bills, and purchases in cashless,
cheque less transactions through a phone.
•They can issue debit cards and ATM cards
usable on ATM networks of all banks.

10. FUNCTIONS OF PAYMENT BANKS
CONTINUE…
• They can transfer money directly to bank
accounts at nearly no cost being a part of the
gateway that connects banks.
• They can provide forex cards to travellers, usable
again as a debit or ATM card all over India.
• They can offer forex services at charges lower
than banks.
• They can also offer card acceptance mechanisms
to third parties such as the ‘Apple Pay.’

11. OTHER ASPECTS
•Deployment of funds:
a. The payments bank cannot undertake lending activities.
b. 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.
•Capital requirement:
The minimum paid-up equity capital for payments banks shall be Rs. 100
Crore. 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).

12. OTHER ASPECTS CONTINUE…
• 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.
• 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.
• Additional Criteria:
a. The operations of the bank should be fully networked and technology
driven from the beginning, conforming to generally accepted standards
and norms.
b. The bank should have a high powered Customer Grievances Cell to
handle customer complaints.

13. SELECTED PROMOTERS FOR
PAYMENT BANKS
Presently eleven firms are given license for opening payment banks. The
promoters are as follows.
1. Aditya Birla Nuvo Ltd,
2. Airtel M Commerce Services Ltd,
3. Cholamandalam Distribution Services Ltd,
4. Department of Posts,
5. Fino PayTech Ltd,
6. National Securities Depository Ltd,
7. Reliance Industries Ltd,
8. Dilip Shantilal Shanghvi,
9. Vijay Shekhar Sharma,
10. Tech Mahindra Ltd,
11. Vodafone m-pesa Ltd

14. Vijay Shekhar Sharma
Dilip Shantilal Shanghvi

15. TIMELINES OF PAYMENT BANKS
Aug 19, 2015 RBI grants “in principle” approval to 11 applicants for payment banks
Feb 04, 2015 RBI releases Names of Applicants of Small Finance Banks and Payments
Banks
Feb 04, 2015 RBI announces External Advisory Committee for evaluating Applications of
Small Finance Banks and Payments Banks
Jan 01, 2015 RBI extends last date of receipt of applications for Licensing of Small Finance
Banks and Payments Banks
Jan 01, 2015 Clarifications to the queries on the Guidelines for Licensing of Small Finance
Banks and Payments Banks
Form III - Form of application for a licence to commence banking business by
a company incorporated in India and desiring to commence banking business
Dec 08, 2014 RBI to post on its Website Clarifications on Guidelines on Licensing of Small
Finance Banks and Payments Banks

16. SUMMERY AND FINDINGS
The payment banks will bridge the last mile (or last 10-20 miles)
between bank branches and the remote customer living in a rural
hamlet.
• Payment banks will essentially rely on technology to reach payment
services to all customers, using mobiles as the vehicle of banking.
Mobiles go even where humans don’t.
• Physical bank branches (or bankers or ATMs) will still be needed for
some functions - opening an account, depositing cash, etc - but all
day-to-day payments, including peer-to-peer payments) can be done
remotely. The mobile phone will become the virtual ATM and small-
payments cheque-book.
• Payment will provide low cost service to customer viz. Rate of
interest of saving account may be from 5-7%. It raises competition
with other commercial bank so commercial will also provide the
same service at same cost to customer. Finally the customer will be
the king.

17. SUMMERY AND FINDINGS
CONTINUE...
• The difference between State Bank and Airtel is simply this: both have
over 200 million customers, but Airtel can go where State Bank cannot
with a branch.
• The arrival of payment banks - including India Post - will transform social
welfare and subsidy schemes. Government subsidy payments to the
poor - whether for LPG, kerosene or even food and fertiliser - can now
be routed through regular and payment banks.
• India Post is already there in places where banks aren't there (with over
1.5 lakh post offices).
• Companies like Airtel and Vodafone and Idea (and Reliance Jio, when it
enters mobile telephony later this year) will reach customers through
mobile-enabled payment systems.
• The payment banks not only provide banking service but also provide
insurance and mutual fund services. It will otherwise facilitate financial
education and investment awareness to the rural people.

18. CONCLUSION
The public sector banks are just behaving sitting ducks and
white elephants. They do not work efficiently. Recently
government has pumped huge capital to certain public
sector bank. Even though public sector, private sector or
foreign bank do not have reach to rural so let change the
traditional banking and foster a new concept of banking.
This payment banks can largely help to jan dhan yojona, in
addition it will drag the weaker section vulenerable into the
financial inclusion process. Those small saving upto 1 lakh
are created in this bank but in long run a huge capital may
be formed. The hamlet dwellers without having investment
knowledge can safely deposit their saving in payment bank
not in chit fund or any other high risk investment area.

19. REFFERENCE
• The Business Standard, 21/08/2015
• The Economics Times, 20/08/2015
• www.rbi.org.in
• www.ndtv.com