PROJECT REPORT ON BANKING LICENSES

AND PAYMENT BANKS

PRESENTED BY: Aditya Jha

Rashi Gangil Sadanand

Contents Banking Banking licenseReforms in banking licensePayment banksOperation of Payment banksHow it is Useful to common people?

Introduction With the potential to become the fifth largest banking

industry in the world by 2020 and third largest by 2025 according to KPMG-CII report, India’s banking and financial sector is expanding rapidly. The Indian Banking industry is currently worth Rs. 81 trillion (US $ 1.31 trillion) and banks are now utilizing the latest technologies like internet and mobile devices to carry out transactions and communicate with the masses.

The Indian banking sector consists of 26 public sector banks, 20 private sector banks and 43 foreign banks along with 61 regional rural banks (RRBs) and more than 90,000 credit cooperatives.

Banking LicenseIndividuals or companies that wish to open a bank and offer financial services are required to obtain a banking license. The process of obtaining a license is often complex therefore it is advised to seek the assistance of a professional consultancy firm

New Banking License Guidelines

• Eligible Promoters• ‘Fit and Proper’ Criteria• Corporate structure of the NOFHC• Minimum voting equity capital requirements for banks and

shareholding by NOFHC• Regulatory framework• Foreign shareholding in the bank• Corporate governance of NOFHC• Exposure norms• Financial Inclusion• Business Plan for the bank• Other conditions for the bank• NBFC’s

Changes in new bank licensing norms

REFORMS EXPANSION PERIOD (1968-1984): The motto of bank nationalization was to make banking

services reaches the masses that can be attributed as “first banking revolution”.

14 banks in 1969 and 6 bank in 1980 were nationalized in order to control the height of economy in conformity with national policy and objective.

This period also witnessed the birth of Regional Rural Banks (RRBs) in 1975and NABARD in 1982 which had priority sector as their focus of activity.

Reforms After Liberalization, Privatization and Globalization

• Since 1991, every governments of India took major steps in reforming the financial sector of the country. The important achievements in the following fields, is discussed under separate heads:

Financial markets Regulators The banking system Non-banking finance companies The capital market Mutual funds Overall approach to reforms Deregulation of banking system Capital market developments Consolidation imperative

Payments banks A Payment Bank in India as a type of bank which is a non-full service niche bank.  A bank licensed as a Payments Bank can only receive deposits and provide remittances. It cannot carry out lending activities. Thus, Payment Banks can issue ATM/debit cards, but can not issue credit cards as they are not empowered to carry out lending activities.

Objectives of Payment Banks

• We can sum up the objectives in one sentence that these banks have been created to help India reach its financial inclusion targets. This type of bank can be highly useful for migrant labourers, low income households, small businesses, and other unorganised sector entities.

• RBI in its guidelines says “the objectives of setting up of payments banks will be to further financial inclusion by providing

(i) small savings accounts and (ii) payments/remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users

What they can and can’t doo 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.

o They can enable transfers and remittances through a mobile phone.

o They can offer services such as automatic payments of bills, and purchases in cashless, cheque less transactions through a phone.

o They can issue debit cards and ATM cards usable on ATM networks of all banks.

o They can transfer money directly to bank accounts at nearly no cost being a part of the gateway that connects banks.

o They can provide forex cards to travellers, usable again as a debit or ATM card all over India.

o They can offer forex services at charges lower than banks.o They can also offer card acceptance mechanisms to third

parties such as the ‘Apple Pay.’

Operations of Payment Banks

How Payment Banks Are Likely To  Impact Indian

Population?

Who has Reserve Bank granted in-principle approval to be a payment

bank? Aditya Birla Nuvo Ltd Airtel M Commerce Services Ltd Cholamandalam Distribution Services Ltd Department of Posts Fino PayTech Ltd National Securities Depository Ltd Reliance Industries Ltd Dilip Shantilal Shanghvi Vijay Shekhar Sharma Tech Mahindra Ltd Vodafone m-pesa Ltd

Referenceswww.rbi.co.inwww.slideshare.inwww.economics.mit.eduwww.mybankinglicense.comwww.google.com