Source-This post on Paytm Payments Bank has been created based on the article “RBI places additional curbs on Paytm Payments Bank amid ‘persistent non-compliances’ published in “Business Today” on 31 January 2024.
Why in The News?
Current Paytm Payments Bank Issue, The Reserve Bank of India recently placed additional restrictions on Paytm Payments Bank Ltd (PPBL) due to non-compliances of its directives.
About Latest Restriction on Paytm Payments Bank
1) They can not take fresh deposits and credit transactions across its services after 29 February.
2) They will not be allowed credit transactions, including via wallets.
3) Other banking services like fund transfers (irrespective of name and nature of services like AEPS, IMPS, etc.), will not be allowed after February 29.
About Payment Banks
Definition– It is like any other bank. However, it operates on a smaller scale without involving any credit risk. It was set up based on the recommendations of the Nachiket Mor Committee.
Objective: To advance financial inclusion by offering banking and financial services to the unbanked and underbanked areas.
Status-It is registered as a public limited company under the Companies Act 2013 and licensed under Section 22 of the Banking Regulation Act 1949.
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Salient Features of Payment Bank
1) They are differentiated, and not universal banks.
2) These operate on a smaller scale.
3) The minimum paid-up equity capital for payments banks shall be Rs. 100 crores.
4) The minimum initial contribution of the promoter to the Payment Bank to the paid-up equity capital shall be at least 40% for the first five years from the commencement of its business.
Banking Operation that Can Be Performed:
1) It can take deposits up to Rs. 2,00,000. It can accept demand deposits in the form of savings and current accounts.
2) The money received as deposits can be invested in secure government securities only in the form of Statutory Liquidity Ratio (SLR).
3) It can offer remittance services, mobile payments/transfers/purchases, and other banking services like ATM/debit cards, net banking, and third-party fund transfers.
4) It can become a banking correspondent (BC) of another bank for credit and other services.
Restricted Activities
1) It can not issue loans and credit cards.
2) It can not accept time deposits or NRI deposits.
3) It can not set up subsidiaries to undertake non-banking financial activities.
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