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October 17, 2016

Banking Awareness 2016 in Simple Language - Lesson 7

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Dear Gr8Ambitionists, in today's Banking Awareness lesson, we shall learn about the Newly Established banks in India. They are Bandhan Bank, Payment Bank, Mudra Bank and India Post Payments Bank. Happy Reading :)

Banking Awareness 2016 - Newly Arrived Banks

Bandhan Bank

  • Tagline : "Aapka Bhala, Sabki Bhalai"
  • Founded : 23rd August 2015
  • Headquarters : Kolkata
  • Key People : 
    • Ashok Lahiri (Chairman)
    • Chandra Sekhar Ghosh (MD, CEO)
Bandhan Bank Ltd, is an Indian Banking and financial services company. Bandhan which started as a micro finance company in 2001, received banking license by RBI in 2014.

On 23rd August 2015, Union Finance Minister Arun Jaitley officially inaugurated the bank in Kolkata. Initially it is opened with 501 branches and 50 ATMs across India.

Note : Bandhan Bank is the first bank to be set up in eastern part of India after Independence.

RBI licensing norms stipulate that a new bank must have a Rs. 500 crore capital.

Payment Banks

Recommended by Nachiket Mor Committee

The goal behind creating these payment banks is to bring about financial inclusion by providing small saving accounts and payments / remittance service to migrant labour and low income household, small business and other organized sector.

Note : Payments Banks are expected to reach customers mainly through their mobile phones rather than traditional bank branches.

On 27th November 2014, RBI released the final guidelines for payment banks. RBI gave licenses to 11 entities to launch payment banks on 19th August 2015.
  1. Aditya Birla Nuvo
  2. Airtel M Commerce Services
  3. Cholamandalam Distribution Services
  4. Department of Posts
  5. FINO pay tech
  6. National Securities Depository
  7. Reliance Industries
  8. Dilip Shanghvi, Sun Pharmaceuticals
  9. Vijay Shekhar Shrama, Paytm
  10. Tech Mahindra
  11. Vodafone M-Pesa
It was also announced that an external advisory committee (EAC) headed by Nachiket Mor would evaluate the license appplications.

The "in-principle" license is valid for 18 months within which the entities must fulfill the requirements. The RBI will consider grant full licenses under Section 22 of the Banking Regulation Act, 1949, after it is satisfied that the conditions have been fulfilled.

The cash limit in the accounts is set to Rs. 1 lakh.

Scope of Activities (What they can do and what they can't do ?) :
  • They can enable transfers and remittances through a mobile phone.
  • They can issue debit cards and ATM cards usable on ATM networks of all banks.
  • They can offer forex services at charges lower than banks.
  • They can offer services such as automatic payments of bills, and purchases in cashless, chequeless transactions through a phone.
  • They can also offer card acceptance mechanisms to third parties such as the ‘Apple Pay.’
  • They can provide forex cards to travellers, usable again as a debit or ATM card all over India.
  • They can transfer money directly to bank accounts at nearly no cost being a part of the gateway that connects banks.
  • They can’t offer loans but can raise deposits of upto Rs. 1 lakh, and pay interest on these balances just like a savings bank account does.
Rules for Payment Banks :
  1. They have to maintain CRR with RBI on its outside demand and time liabilities. 
  2. It will have to invest minimum 75% of its demand deposit balances in SLR (Statutory Liquidity Ratio) eligible Govt. securities / treasury bills with maturity upto one year and hold maximum 25% current & time / F.D. with other scheduled banks for operational purpose. 
  3. The minimum paid up capital required for these banks is 100 crore. 
  4. These banks have leverage ratio of not less than 3%.

Mudra Bank

MUDRA Ltd. has been coverted into MUDRA small industries development Bank of India as a wholly owned subsidiary of SIDBI.

MUDRA Bank - Micro Units Development and Refinance Agency Bank
  • CEO : Jiji Mammen
  • Headquarters : New Delhi
Mudra Bank was launched on 8th April 2015 with the Corpus of Rs. 20,000 crore and credit guarantee Corpus of Rs. 3000 crore

A credit guarantee fund for MUDRA units (CGFMU) for guaranteeing loans sanctioned under the scheme with effect from 8th April 2015.
  • The National Credit Guarantee Trustee Company Ltd. (NCGTC Ltd), a government owned company, constituted under companies act to manage & operate credit gurantee funds will be the trustee of fund. 
  • The Guarantee would be provided based on a portfolio basis to a maximum extent of 50% of amount in default in portfolio. 
Functions :
  • Mudra Bank will undertake re-finance operations and provide support services with focus on Portal Management, data analysis and activity advised by Government of India.
  • Will act as a regulator for the micro finance institutions(MFI), providing refinancing services and guidelines to MFI.
1st Mudra Card was launched by Corporation Bank in Mangaluru.
This card was launched by P. M. Narendra Modi on 8th April 2015.

MUDRA Functioning :
  • Mudra Offerings :
    • Re-Finance for Micro units to Commercial Banks / NBFCs / RRBs / Cooperative Banks
      • Small Rtailers / Shopkeepers
      • Women enterpreneurs
      • Manufacturing & Service enterprises in Rural, Urban & Semi Urban areas
    • Development & Financial Literacy Support
      • Skill Development, Enterprenuership, Marketing Training, Financial Literacy
Mudra Bank has launched 3 loan instruments :
  1. Shishu : Covers loan upto Rs. 50,000.
  2. Kishor : Covers loan above Rs. 50,000 upto 5 lakhs.
  3. Tarun : Covers loan above Rs. 5 lakhs and upto 10 lakhs. 
    • It covers land-transport, community, social & personal service, food products & textile products sector. 
Who are eligible to avail loans from MUDRA bank ?
  • Small manufacturing units
  • Shopkeepers
  • Fruits or vegetable vendors
  • Artisans
More offers in future :
  1. Mudra Card
  2. Portfolio Credit Guarantee
  3. Credit Enhancement

India Post Payments Bank (IPPB)

  • IPPB has been recently incorporated as a Public Limited Company under the Department of Posts with 100% GOI equity.
Important Timeline :
    • In 2006, it was announced that India Post would open a bank to erase its ₹1,000 crore deficit during the 11th Five Year Plan, emulating Poste italiane.
    • In December 2013, India Post announced that it would install ATMs in 1000 of its office across India in the first half of 2014
    • On 27 February 2014, India Post opened its first ATM in Chennai.
    • In September 2014, a task force was formed by Prime Minister Narendra Modi which aimed to study ways in which the existing postal network could be leveraged.
      • The task force was headed by T. S. R. Subramanian.
      • On 4 December 2014, the task force submitted its report to Minister for Communications and Information Technology Ravi Shankar Prasad.
      • The report said that more services should be provided in the field of banking, insurance and e-commerce.
    • On 28 February 2015, during the presentation of the Budget it was announced that India Post will use its large network to run a payments bank.
    • IPPB incorporated as a public limited company under the Department of Posts, Govt. of India on 17th August, 2016.
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