Lok Sabha Question No. 421 (STARRED), answered on 2016-12-16
Subject: Payment Banks
Ministry: FINANCE
Asked by: KUNWAR HARIBANSH SINGH, SUDHEER GUPTA

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## STARRED QUESTION NO.*421

TO BE ANSWERED ON THE 16 th  December, 2016/ Agrahayana 25, 1938 (SAKA)

## PAYMENT BANKS

## *421.   KUNWAR HARIBANSH SINGH: SHRI SUDHEER GUPTA:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has granted in principle approval for setting up of Small Finance Banks and Payment Banks in the recent past and if so, the details thereof;
- (b) whether  any  entity  which  has  been  awarded  the  licence  launched  its bank so far;
- (c) the  time  frame  by  which  the  said  banks  are  likely  to  be  opened  by successful entities;
- (d) whether Reserve  Bank  of India/Government has prescribed any guidelines in this regard, if so, the details thereof; and
- (e) the manner in which the guidelines are likely to be enforced?

## ANSWER

THE FINANCE MINISTER (SHRI ARUN JAITLEY)

(a) to (e):  A Statement is laid on the Table of the House.

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## STATEMENT  FOR  LOK  SABHA  STARRED  QUESTION  NO.*421  FOR  16 TH DECEMBER,  2016  REGARDING  'PAYMENT  BANKS'  TABLED  BY  KUNWAR HARIBANSH SINGH AND SHRI SUDHEER GUPTA, MEMBERS OF PARLIAMENT.

(a)  to  (e): Reserve  Bank  of  India  (RBI)  issued  guidelines  for  licensing  of  small finance banks and payments banks on November 27, 2014 and granted in-principle approvals to 10 applicants to set up small finance banks and to 11 applicants to set up payments banks. The applicants are to comply the requisite conditions laid down in  the  in-principle  approval  letters,  after  satisfying  which  RBI  would  grant  them banking  licences.    The  in-principle  approval  for  payments  banks  would  expire  in March 2017, and for small finance banks would expire in April 2017.

One  payments  bank  applicant  has  been  granted  banking  licence  and  has subsequently commenced operations as Airtel Payments Bank Limited. Six entities have been issued banking licence to commence small finance bank business so far (i)  Capital Local Area Bank Ltd., Jalandhar (ii) Equitas Holding P Ltd., Chennai (iii) ESAF Microfinance and Investments Private  Limited,  Chennai (iv)  Suryoday  Micro Finance Private Limited, Navi Mumbai (v) Ujjivan Financial Services Private Limited, Bengaluru and (vi) Utkarsh Micro Finance Private Limited, Varanasi. Of these, two small  finance  banks  as  Capital  Small  Finance  Bank  Limited  and  Equitas  Small Finance Bank Limited, have commenced operations.

The  guidelines  for  small  finance  banks  provide  inter-alia  that  (i)  eligible promoters could be resident individuals/professionals with 10 years of banking and finance  experience  including  companies  controlled  by  them  etc.  (ii)  shall  primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections (iii) The minimum paid-up equity capital for small finance banks shall be Rs. 100 crore and (iv) all prudential norms and regulations of RBI as applicable  to  existing  commercial  banks  including  requirement  of  maintenance  of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).

The guidelines for payment banks provide inter-alia that (i) eligible promoters can be non-bank Pre-paid Payment Instrument (PPI) issuers; and other entities like mobile  telephone  companies  etc.  (ii)  shall  primarily  accept  demand  deposits  upto maximum  balance  of  Rs.  1,00,000  per  individual  customer.  (iii)  Issue  ATM/debit cards, payments and remittance services. (iv) maintain CRR with the Reserve Bank on  its  outside  demand  and  time  liabilities  and  invest  at  least  75  per  cent  of  its 'demand deposit balances' in SLR eligible Government securities/treasury bills.

Small finance and payment banks will be licensed under Section 22 (1) of the Banking  Regulation  Act,  1949  and  consequently  all    regulatory  and  supervisory frameworks  that are applicable to  commercial  banks  have  also  been  made applicable to these banks with suitable calibrations in view of the differentiated scope of such banks.

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