The Nachiket Mor panel appointed by Reserve Bank of India has recommended formation of special category of banks, called payments banks, in order to make payment services and deposit products to small businesses and low-income households more effective and meaningful in India. Such banks will have a minimum entry capital requirement of Rs 50 crore, one-tenth of what a full-service bank requires, the panel has recommended saying these banks will have a near-zero risk of default. Payments banks will be required to comply with all RBI guidelines relevant for commercial banks.
The panel has also mooted that existing banks should be permitted to create payments bank as a subsidiary. RBI had appointed the committee to come out with recommendations for exclusive banks for financial inclusion
The panel’s recommendations come at a time when the RBI is finalizing its decision on granting licenses for new banks and the central bank is veering towards the idea of differentiated banking licences for specific banking activities. The recommednations now have been put up on the central bank’s website inviting comments.
The panel has also recommended the creation of a set of banks called wholesale banks to provide liquidity to other banks and financial institutions creating assets in the so-called priority sectors. Such banks, given that their primary role is to give loans, will only be permitted to accept deposits of more than Rs 5 crore. They too will have a minimum entry capital requirement of Rs 50 crore. Another suggestion is the creation of a universal electronic bank account (UEBA) for all adult Indian citizens and access to formal credit for low-income households and small businesses by January 2016 and major changes in priority sector lending norms. The panel said India should have enough number and distribution of electronic payment access points so that every single resident would be within a 15 minute walking distance from such a point anywhere in the country by January 2016.
The panel was headed by Nachiket Mor and had as its members Prakash Bakshi, former chairman of National Bank for Agriculture and Rural Development, and Bharat Doshi, chairman of Mahindra and Mahindra Financial Services.