On February 22, 2021 Reserve Bank of India(RBI) announced that Fino Payments Bank Limited has been included in the Second Schedule to the RBI Act, 1934. With this inclusion, Fino Payments bank gets the status of scheduled commercial bank.
Benefits for Fino Payment bank in becoming a scheduled bank:
i.According to RBI, Fino payment bank can improve its banking position in the treasury and participation in Liquidity Adjustment Facility (LAF) window.
What is LAF?
It is a monetary policy tool which allows banks to borrow money through repurchase agreements(repo) or to make loans to the RBI through reverse repo agreements.
ii.It helps to the bank to reinforce its business proposition on liabilities generation.
iii.It offers strategic impetus for the bank to improve its scope on balance sheet management and also to explore additional avenues for business.
iv.It will be in a better position to explore and manage government businesses.
v.Mandates in relation to pensions, Provident Funds(PFs) and various welfare schemes under Direct Benefit Transfer (DBT) helps the bank to improve its impact in the financial inclusion space.
Note – The RBI introduced the LAF as a result of the Narasimham Committee on Banking Sector Reforms (1998).
When will a Payment Bank be given scheduled bank status?
If the payment bank is found suitable as per Section 42 (6) (a) of the RBI Act, 1934, it will be given the status of scheduled bank.
Gist about scheduled bank
i.As per RBI, all the banks included in the 2nd schedule of the RBI Act, 1934 are termed as Scheduled Banks.
ii.These banks comprise Scheduled Commercial Banks and Scheduled Co-operative Banks.
Scheduled Commercial Banks:
They are categorised into 5 different groups as per their ownership and / or nature of operation, namely,
- State Bank of India and its Associates
- Nationalised Banks
- Private Sector Banks
- Foreign Banks
- Regional Rural Banks.
Scheduled Co-operative Banks:
It consist of the following
- Scheduled State Co-operative Banks
- Scheduled Urban Co operative Banks
Paid up Capital:
To become a scheduled bank, the paid up capital and collected funds of the bank must not be less than Rs 5 lakhs. Yet, in a short while to start a commercial bank, The Reserve Bank of India recommended the least capital of 100 crores.
- The bank becomes eligible for debts/loans at the bank rate from the RBI
- It gets the membership of clearing house automatically
- It gets rediscount from RBI for first class exchange bills
Gist about Payments Bank:
Registered & Licensed
i.The payments bank will be registered as a public limited company under the Companies Act, 2013, and licensed under Section 22 of the Banking Regulation Act, 1949.
ii.It will have specific licensing conditions that restricts its activities mainly to acceptance of demand deposits and provision of payments and remittance services
Paid-up equity capital
The minimum paid-up equity capital of the payments bank shall be Rs. 100 crore.
Recent Related News:
On 19th October 2020, Fino Payments Bank announced its plan to add an additional 300 points at the Bharat Petroleum Corporation Limited(BPCL) outlet to its existing 1075 in Tamil Nadu(TN). This is aimed to support the truck drivers to get a fleet card recharged by paying equivalent cash. The SmartFleet initiative is a first of its kind in India which provides assistance to the transporters to efficiently manage their funds.
About Fino Payments Bank Limited:
It is the 1st payments bank to go live with 410 branches and more than 25,000 banking points on day one.
Incorporated– 4th April, 2017 with the name Fino Payments Bank Limited.
MD and CEO– Rishi Gupta
Head Office– Navi Mumbai, Maharashtra