May-2015

BANKING
Table2: Restrictions on PB and their Implications
Particulars Restrictions Implications
Scope of Activities
(Deposit taking,
Remittances, Payments,
issue of ATM Card, Cross
Broader Payment, selling
of MF and insurance)
• Maximum deposit/balance Rs. 100000
• PBs can partner with existing card networks, banks as well as
merchants in issuing card.
• Compliance with information security risk management will be
expected in mobile payments.
• Based on RBI approval PB is to process transactions in foreign
exchange.
• Based on prior approval of RBI as well as the relevant sectoral
regulator for the selling of mutual fund and insurance product.
• PB can accept deposits for current as well
as savings account. Significantly unlike PPI
issuers, PBs can cash out their customers.
• Cash-out is also permitted at POS
machines, which will allow prospective PBs
to better leverage their non-Branch agent
networks.
• Adoption of security risk management in
small value payment is a challenge to PB
Granting Credit Facilities
Eligible Promoter
Deployment of Fund
Capital Requirement
Shareholding Pattern
Other Requirements
PB cannot lend but it can act as BC of Commercial Bank while
lending fund
• Existing non-bank PPI issuers; and other entities such as
individuals / professionals, NBFCs, BCs, MNOs, super-market
chains, companies, real sector cooperatives; that are owned and
controlled by residents; and public sector entities
• A promoter/promoter group can have a joint venture with an
existing scheduled commercial bank.
• Promoter/promoter groups should be ‘fit and proper’ with a sound
track record of professional experience or running their businesses
for at least a period of five years.
• Minimum CRR with the RBI
• Invest minimum 75% of demand deposit in Govt. Securities/
Treasury Bills with maturity up to one year.
• Maximum 25 per cent in current and time/fixed deposits with
other scheduled commercial banks for operational purposes and
liquidity management.
• The minimum paid-up equity capital for PB shall be Rs. 100 crore.
• PB should have a leverage ratio of not less than 3 per cent, i.e.,
its outside liabilities should not exceed 33.33 times its net worth
(paid-up capital and reserves).
• The promoter's minimum initial contribution to the paid-up equity
capital shall at least be 40 per cent for the first five years from the
commencement of its business.
• Diversified ownership and listing will be mandatory within 3 years
of reaching a net worth of Rs. 500 crore.
• Maximum 74% Foreign Shareholding.
• At least 25% of physical access points including BCs in rural
centres.
• Fully networked and technology driven operations from the
beginning.
This may increase the scope of PB. It may
provide a revenue stream depending on how
customer friendly the process of appraisal,
disbursal, and role of PB in loan repayment
or collections and nature of remuneration by
partner bank is, for the PB.
Conversion of PPI into PB will address the
limitations of the PPI model like inability to pay
interest on balances and contagion risk.
This mandatory requirement of parking fund in
risk free instruments will minimize credit and
liquidity risk of PB
• Minimum capital of Rs. 100 crore will
guarantee that only serious players will
apply for the licence.
• Leverage ratio will cut down the risk of over
leveraging and ensure sufficient capital
cushion to absorb various risk
Minimum promoter holding norm guarantee
that promoter’s interest is involved in the
operation during the initial phase.
• Ensures basic banking services to the low
income households in the unbanked areas.
• Technology leveraging for low transaction
cost for the customer
90 the MANAGEMENT ACCOUNTANT MAY 2015
www.icmai.in