The Reserve Bank of India (RBI) today released guidelines that will govern payment and small banks.
The prudential regulatory framework for payments banks (PBs) will largely be drawn from the Basel standards. However, given the financial inclusion focus of these banks, it will be suitably calibrated, the RBI press release said.
Following are the guidelines:
-Minimum capital requirements for payments banks set at 15 percent
-Common Tier-I equity is set at 6 percent for payments banks
-Common Tier-2 capital is set at 7.5 percent for payments banks
-Minimum Tier-I capital is set at 7.5% for payments banks
-Capital conservation buffer not applicable for payments banks
-Counter-cyclical capital buffer not applicable for payments banks
-Large exposures limits not to be more than 5% of outside liabilities of payment banks
-Payment banks permitted to participate in call money & cblo mkt as borrower & lender
-Payment banks to maintain a minimum investment of more than 75 percent of demand deposit balances in government securities.
– Payment banks Can’t classify investment as held to maturity (HTM) category unless it comes from own fund
– Payment banks not allowed to participate in ‘when issued’, ‘short sale’ transaction
– Payment banks will be permitted to invest in bank certificates of deposits within the limit applicable
– Payment banks will not be permitted to lend to any person including their directors
– Payment banks may lend to their own employees out of the bank’s own funds
– Payment banks are not allowed to undertake para-banking activities except those in guidelines
For small banks, the minimum capital requirement is set at 15 percent, while leverage ratio is 4.5 percent. LCR, as applicable to scheduled commercial banks, will be applicable to small finance banks.
More to follow…