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Final guidelines for payment banks issued

The Reserve Bank of India has released final guidelines for setting up small or payment banks. In terms of these guidelines, telecom companies, supermarkerts and entitites such as those conducting businesses like electronic wallets can set up payments banks. The central bank intends to create such banks in order to provide basic savings, deposit, payment and remittance services to people who currently do not have a bank account, especially scores of migrant workers. Small banks are being set up to offer loans to small businesses and marginal farmers. While the final guidelines are almost similar to those released by the regulator as draft guidelines earlier, these now offer expanded scope and give more leeway in the manner in which deposits raised by these banks are deployed. In the case of payments banks, entities ranging from telecom companies and prepaid payment instrument issuers, to supermarket chains and NBFCs can apply, while a promoter can also have a joint venture with an existing scheduled commercial bank to set up a payments bank. The minimum paid-up equity capital for these banks will be Rs 100 crore, while the promoter contribution has been set at a minimum of 40% at the start. These banks will initially be restricted to holding a maximum balance of Rs 1,00,000 per individual customer. They can offer payments and remittance services and issue ATM/debit cards, but not credit cards. Such entities can also distribute simple financial products such as mutual fund units and insurance products.Apart from amounts maintained as cash with the central bank (CRR), payments banks will be required to invest at least 75% of their demand deposits in SLR eligible government securities or treasury bills with maturity up to one year. The remaining 25% of their fixed deposits can be parked with other scheduled commercial banks for operational purposes and liquidity management.

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