Payments Banks are governed by the guidelines issued by the Reserve Bank of India (RBI) and are subject to various regulatory requirements to ensure financial stability and promote financial inclusion. The minimum paid-up capital required for establishing a Payments Bank is ₹100 crore. The promoter’s shareholding must remain at least 40% for the first five years from the commencement of business. Foreign investment is permitted according to the Foreign Direct Investment (FDI) policy applicable to private sector banks in India.
The voting rights of shareholders are regulated under the Banking Regulation Act, 1949. Generally, the voting rights of any shareholder are capped at 10%, although the RBI may increase this limit up to 26%. Any acquisition of more than 5% shareholding in a Payments Bank requires prior approval from the RBI. To ensure sound governance, the majority of the Board of Directors must consist of independent directors appointed as per RBI guidelines.
Payments Banks are required to be fully networked and technology-driven from the beginning of their operations. They are allowed to accept deposits, facilitate remittances, provide payment services, and collect utility bill payments. However, they are strictly prohibited from lending money or granting loans to any person, including their own directors. They are also not permitted to issue credit cards.
Initially, customer deposits were capped at ₹1 lakh per customer, though the RBI later enhanced this limit to ₹2 lakh per customer. A Payments Bank cannot establish subsidiaries to undertake non-banking financial activities. To promote financial inclusion, at least 25% of its banking outlets or access points must be located in unbanked rural areas.
To clearly distinguish them from other banking institutions, every Payments Bank must use the term “Payments Bank” as part of its name. These banks receive licences under Section 22 of the Banking Regulation Act, 1949, and are registered as public limited companies under the Companies Act, 2013. Through these regulations, RBI ensures that Payments Banks remain focused on providing safe, accessible, and technology-based banking services to the public while supporting the objective of financial inclusion.