Previous Year Question
The RBI issued licensing guidelines for Payment Banks in November 2014. These banks were intended to advance financial inclusion by providing small savings, payment and remittance services to small businesses, migrant workers, low-income households and the unorganised sector.
Statement 1 is correct.
Under the RBI’s original guidelines, the following entities owned and controlled by residents could be eligible to promote a Payment Bank:
existing issuers of Prepaid Payment Instruments;
Non-Banking Financial Companies;
Corporate Business Correspondents;
mobile telephone companies;
supermarket chains;
other real-sector companies;
cooperatives owned and controlled by residents; and
public-sector entities.
An eligible promoter could also form a joint venture with a Scheduled Commercial Bank, subject to compliance with the RBI’s capital, ownership, management and fit-and-proper requirements.
Statement 2 is incorrect.
A Payment Bank may issue an ATM or Debit Card because the customer uses the money available in the deposit account. It cannot issue a Credit Card.
A Credit Card provides a credit facility to the customer. Since a Payment Bank is prohibited from undertaking lending activities, issuance of Credit Cards is inconsistent with its permitted scope of business.
Statement 3 is correct.
A Payment Bank may accept demand deposits and provide payment and remittance services, but it cannot extend loans and advances like a conventional commercial bank.
Its permitted activities generally include:
accepting demand deposits through savings and current accounts;
providing domestic remittance and payment services;
issuing ATM/Debit Cards;
acting as a Business Correspondent; and
distributing permitted insurance, pension and investment products.
To protect depositors’ funds, a Payment Bank must invest a large prescribed proportion of its demand-deposit balances in short-maturity SLR-eligible government securities and maintain the remaining prescribed portion with Scheduled Commercial Banks. It cannot use these deposits for conventional lending.
1 and 2 only
1 and 3 only
2 only
1, 2 and 3
Correct Answer: B
Detailed Solution
The RBI issued licensing guidelines for Payment Banks in November 2014. These banks were intended to advance financial inclusion by providing small savings, payment and remittance services to small businesses, migrant workers, low-income households and the unorganised sector.
Statement 1 is correct.
Under the RBI’s original guidelines, the following entities owned and controlled by residents could be eligible to promote a Payment Bank:
existing issuers of Prepaid Payment Instruments;
Non-Banking Financial Companies;
Corporate Business Correspondents;
mobile telephone companies;
supermarket chains;
other real-sector companies;
cooperatives owned and controlled by residents; and
public-sector entities.
An eligible promoter could also form a joint venture with a Scheduled Commercial Bank, subject to compliance with the RBI’s capital, ownership, management and fit-and-proper requirements.
Statement 2 is incorrect.
A Payment Bank may issue an ATM or Debit Card because the customer uses the money available in the deposit account. It cannot issue a Credit Card.
A Credit Card provides a credit facility to the customer. Since a Payment Bank is prohibited from undertaking lending activities, issuance of Credit Cards is inconsistent with its permitted scope of business.
Statement 3 is correct.
A Payment Bank may accept demand deposits and provide payment and remittance services, but it cannot extend loans and advances like a conventional commercial bank.
Its permitted activities generally include:
accepting demand deposits through savings and current accounts;
providing domestic remittance and payment services;
issuing ATM/Debit Cards;
acting as a Business Correspondent; and
distributing permitted insurance, pension and investment products.
To protect depositors’ funds, a Payment Bank must invest a large prescribed proportion of its demand-deposit balances in short-maturity SLR-eligible government securities and maintain the remaining prescribed portion with Scheduled Commercial Banks. It cannot use these deposits for conventional lending.