RBI Releases Guidelines For Payments And Small Banks

An individual with 10 years' experience in banking and finance sector can set up a bank with Rs 100 crore capital, of which 40% should be the individual’s contribution, as per the draft guidelines on payments and small banks issued by the Reserve Bank of India (RBI).

These banks would help in fulfilling financial inclusion goals of the government, providing credit to the poor, marginal farmers and also those who do not have bank accounts.

Payments banks cannot lend money, however, they will be allowed to undertake remittances and manage deposits. Small banks can undertake various kinds of lending activities for small businesses and the agriculture sector. Payments banks will provide payments and remittance services and demand deposit products to small businesses and low-income households. Initially, they will be allowed to hold a maximum balance of Rs one lakh per customer.

Rishi Gupta, COO & ED, FINO PayTech, which provides banking technology platform for financial inclusion, said, "Payments banks will help de-clutter commercial banks from financial inclusion activities and bring in more focused approach in serving the rural masses. We at FINO PayTech look forward to be a part of this ecosystem."

"We will require to further analyse the guidelines and subsequent business models before taking any call," said Gupta.