The RBI's move to issue differentiated banking licences is path-breaking but challenges galore.
They are all licensed by the Reserve Bank of India (RBI) as Prepaid Payment Instruments (PPIs) and have to maintain an escrow account with a commercial bank. No interest is paid on the deposits. The RBI comes into the picture as it regulates acceptance of deposits from the public. Last week, the RBI released its draft guidelines for two new categories of banks - payment banks and small banks. The final guidelines will be issued in August after receiving feedback.
The biggest advantage for companies in shifting from prepaid cards to a bank is the right to raise savings and current accounts up to Rs 1,00,000 from a customer. These deposits will get annual interest of four to five per cent and must be invested in government securities that return eight to nine per cent interest.
They are all licensed by the Reserve Bank of India (RBI) as Prepaid Payment Instruments (PPIs) and have to maintain an escrow account with a commercial bank. No interest is paid on the deposits. The RBI comes into the picture as it regulates acceptance of deposits from the public. Last week, the RBI released its draft guidelines for two new categories of banks - payment banks and small banks. The final guidelines will be issued in August after receiving feedback.
The biggest advantage for companies in shifting from prepaid cards to a bank is the right to raise savings and current accounts up to Rs 1,00,000 from a customer. These deposits will get annual interest of four to five per cent and must be invested in government securities that return eight to nine per cent interest.
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