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Payment bank is in news because RBI Committee recommended it. Well see Nachiket Committee in detail,
in separate articles later. This article only deals with Payment banks and allied Topics.
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By the way, unlike currency notes, these prepaid instruments are not fungible. For example, if you have 500
Rs. in your Airtel money account, you cannot get it exchanged for 500 Rs. in Oxigen prepaid card. (even if
you manage to do it by some jugaad- there will be ~0.5% commission charge, you never get full
convertability from one instrument to another instrument.)
For more on fungibiity, click me
Mohan
Hold on! That raises even more questions. Banks main function is to take deposit from
one guy, give it as loan to other guy and make profit in between these interest rates.
But if bank cannot loan the money, then how will they make profit and howll they give
Hold your horses, brother. Payment bank will be permitted to invest in SLR approved securities.
Meaning?
Meaning Payment bank can invest customers money in Government securities (G-Sec) and
corporate bonds of reputed companies like Infosys, reliance, TCS etc.
So?
Investment in SLR securities give you return of atleast ~8%. So, payment bank can keep some
money as profit and give the remaining to customer as interest.
Toh thik hai. (then it is alright!) but what is SLR?
click me
Nachi
Mohan
Nachi
Mohan
Nachi
Nachi
No
No
Yes
No
Yes
No
Yes
Yes
No
No
No
Yes
Yes
Yes
Yes (only if both party
agree)
For mobile banking, you need an active mobile number to send those SMS and passwords
during online transaction.
And You just said Mobile company can also get license to open Payment bank.
1. to provide USSD connectivity as per recent TRAI regulations (Rs 1.5 per 5 interactive
sessions.)
2. to categories all SMSs related to banking and financial transactions as Priority SMS
services (with reasonable rates)
Mohan
Man!! that means RBI and TRAI will have to take additional headache and supervision to
prevent customer exploitation.
That is one more negative argument against Payment banks. Better just let the regular
banks handle stuff instead of opening new payment banks.
Anyways, what is this USSD connectivity?
Mock Questions
1. What do you understand by the term Pre-Paid Instrument Providers (PPI)?
A. White label ATMs
B. Brown Label ATMs
C. Both A and B
D. Neither A nor B
2. Recently, Nachiket Committee on Financial services, has recommended a new type of Payment
banks. Which of the following, is not true about them?
A. Scheduled commercial banks will be allowed to open Payment banks as subsidiaries.
B. Payment banks will be exempted from CRR and SLR requirement.
C. Mobile phone companies, consumer goods companies, post office and cooperative
societies will be allowed to apply for Payment bank license.
D. None of Above
3. Correct statements about Pre-Paid Instrument:
A. With RBIs permission, prepaid instruments are issued in the form of smart cards, internet
wallets, or mobile wallets.
B. They can be used for purchasing railway tickets, paying utility bills and purchase of goods
and services.
C. Scheduled Commercial banks can issue such Pre-Paid instruments.
D. As per RBI rules, 4% interest rate has to be paid on each such Prepaid instruments
4. Find the correct statement(s) about Payment Banks as recommended by Nachiket Mor Committee
A. Payment banks will be kept outside the purview of Banking regulation Act.
B. Payment banks will be focusing mainly on Service class employees and HNI (High networth
individuals).
C. Payment banks will have to follow the targets under PSL (Priority sector lending).
D. None of above
5. Correct Statements about USSD
A. USSD facilitates real-time two-way exchange of data between mobile phone and the service
provider.
B. As per TRAI regulation, mobile companies are requireed to provide all USSD services free of
cost.
C. Both A and B
D. Neither A nor B
Descriptive/Mains
1. Nachiket Committees proposed payment banks are better suited to achieve the goal of financial
inclusion compared to the existing setup in banking sector. Do you Agree? Justify your stand. (10m
| 200 words)
2. Write a note on Nachiket Mor Committees recommendations regarding Payment Banks. (5m | 100
words)
3. Compare and contrast between the proposed Payment banks and Scheduled Commercial banks.
(5m | 100 words)
4. Define USSD. Explain its utility in Mobile Banking and Financial inclusion. (5m | 100 words)
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