According to the RBI, Paytm Payments Bank failed to adhere to the Guidelines for Licensing of Payments Banks under the Banking Regulation Act, 1949.
About Payment Banks
- Recommended by the Nachiket Mor Committee in 2014.
- Definition: A Payment Bank is a financial institution set up to operate on a smaller scale with minimal credit risk under Differentiated banking licenses (DBL)
- DBL are specialized licenses designed to serve specific customer segments.
- Other Financial Institution under DBL: Small Finance Banks.
- DBL are specialized licenses designed to serve specific customer segments.
- Objectives: To promote financial inclusion through serving unbanked and underbanked populations (E.g. Migrant workers, low-income households).
- Advantages: Boost digital payments, offer a safe alternative for small transactions, and reduce cash dependency.
- Regulatory Framework:
- Registration: Companies Act, 2013.
- Governance: Banking Regulation Act, 1949; RBI Act, 1934; Foreign Exchange Management Act, 1999; Payment and Settlement Systems Act, 2007.
- Capital Requirement: They must have a minimum paid-up capital of ₹100 crore (promoters’ share to be ≥40% for the first five years).
- 75% funds in SLR securities, 25% with banks.
