Payments Bank Licence from RBI
A payments bank licence lets a company take deposits and offer payments without lending. It needs ₹100 crore paid-up capital and a promoter holding 40% for five years. We check eligibility, shape the entity and prepare the application to RBI.
What it is
A payments bank is a niche bank that accepts demand deposits, issues debit cards and offers payments and remittances. It cannot lend and cannot issue credit cards. RBI created the category to serve migrant workers, low-income households and small businesses with simple savings and payment services.
The rules sit in RBI’s Guidelines for Licensing of Payments Banks (November 2014) and the Banking Regulation Act, 1949. Applicants file Form III with the Department of Banking Regulation. Since this is a bank licence, RBI decides at its own discretion, so the application has to be strong and clean.
Who it applies to
Prepaid and mobile wallet players
Picture a wallet company with lakhs of users who now wants to hold their savings, not just wallet balances. That is the natural fit.
Telecom, retail and BC networks
Mobile companies, supermarket chains, corporate business correspondents and cooperatives with wide physical reach can promote a payments bank.
Fintech groups with a banking plan
Entities owned and controlled by residents, with five years of relevant experience and a sound record, can apply. Existing NBFCs may also qualify as promoters.
Why it matters
You can hold customer deposits
A wallet only stores value. A payments bank takes savings and current deposits and can issue debit cards and run internet banking.
The capital bar is clear
₹100 crore paid-up equity, a minimum 15% capital adequacy ratio and a minimum 3% ratio of capital to total exposure are set out in writing.
The rules shape your business model
No lending, at least 75% of demand deposits in government securities, and a customer balance cap decide how revenue works. Work out the model before you apply.
Documents required
Promoter documents
- Constitutional documents, audited financials and shareholding details
- Proof of 5 years of relevant experience and track record
- Fit and proper declarations for promoters and directors
Bank-level documents
- Detailed business plan and project report
- Capital plan showing ₹100 crore paid-up equity and the 40% promoter holding
- Technology, risk and customer service plans
Governance papers
- Board composition with a majority of independent directors
- Grievance redressal set-up and ombudsman coverage
- Foreign shareholding details, if any, under FDI limits
How it works
Test eligibility and the business case
We review the promoter, experience, shareholding and plan against RBI’s guidelines and tell you where the gaps are.
Prepare the project report and capital plan
We help structure the entity, the promoter holding and the capital plan, with the business plan written to RBI’s format.
File Form III with RBI
We prepare Form III and annexures for submission to the Department of Banking Regulation, Mumbai.
Handle RBI queries
In practice, RBI evaluates through an external advisory committee and may ask for more. We draft the replies and coordinate meetings.
Prepare for in-principle approval
If approved, you have 18 months to meet the conditions and start. We map the launch checklist and post-licence reporting.
Timelines
Application window
The 2014 guidelines set a first window, then said applications would be considered continuously. Check RBI’s current position; we confirm it before you spend on the file.
In-principle approval: 18 months
The bank must start business within 18 months of the in-principle approval, which RBI sets as validity.
Decision time
RBI does not publish a fixed time and its decision is final. We cannot promise a date, but we plan for a long, query-driven process.
What happens if you miss the conditions
In-principle approval lapses
If the 18-month period ends without the bank starting, the approval is no longer valid and you may have to apply afresh.
Capital or promoter shortfall
The promoter must hold at least 40% for the first five years and capital ratios must be maintained. A breach invites RBI action.
Banking without a licence
Accepting deposits as a bank without RBI’s licence is an offence under the Banking Regulation Act. Wallet and PA authorisations do not cover it.
What a payments bank can and cannot do
The permitted activities in the guidelines are narrow by design. Plan your revenue model around them.
| Allowed | Not allowed |
|---|---|
| Savings and current accounts, up to ₹2 lakh per customer | Lending of any kind |
| Debit cards, internet banking, remittances, bill payments | Credit cards |
| Business correspondent work; distribution of mutual funds, insurance and pensions with approval | Setting up subsidiaries |
RBI raised the per-customer balance cap from ₹1 lakh to ₹2 lakh in April 2021. At least 75% of demand deposits must sit in government securities and treasury bills.
Frequently asked questions
What is the capital needed for a payments bank?
A payments bank needs ₹100 crore of paid-up equity capital, a minimum 15% capital adequacy ratio on risk-weighted assets and a minimum 3% ratio of capital to total exposure. The promoter must hold at least 40% for the first five years. We check the figures against the guidelines and plan how the capital is brought in before you file.
Who can promote a payments bank?
Existing non-bank prepaid issuers, NBFCs, corporate business correspondents, mobile telephone companies, supermarket chains, cooperatives and public sector entities can apply. Individuals and professionals with five years of experience also qualify. Entities should be owned and controlled by residents and pass the fit and proper test. We check where you stand first.
Can a payments bank give loans?
No. A payments bank cannot lend and cannot issue credit cards. It takes deposits, offers payments and remittances, and invests at least 75% of demand deposits in government securities. If lending is part of your plan, other routes such as an NBFC licence may fit better, and we can compare them.
What is the deposit limit per customer?
The cap is ₹2 lakh per individual customer. RBI originally set it at ₹1 lakh and doubled it in April 2021. A balance can rise above the cap during the day for remittance, as long as the end-of-day balance stays within the limit. We build your product design around this.
Can foreign investors hold shares in a payments bank?
Yes, within limits. The guidelines allow foreign shareholding up to 74% of the paid-up capital, with automatic route up to 49%, and a minimum of 26% resident holding. Individual FPI and NRI holdings are capped. We map the structure against FDI rules and prepare reporting where needed.
How long is the in-principle approval valid?
The in-principle approval from RBI is valid for 18 months. The bank must meet the conditions and start business within that time. If it does not, the approval lapses. We keep a launch checklist with dates, so nothing is left to the last month.
How is a payments bank different from a payment aggregator or a wallet?
A payments bank is a licensed bank that holds deposits under the Banking Regulation Act. A payment aggregator or wallet is authorised under the Payment and Settlement Systems Act and does not take deposits as a bank. The capital, scope and RBI scrutiny are very different. We help you choose the right licence for your plan.
Does Taxhint hold any RBI status?
No. We do not hold any RBI status. We review eligibility, structure the entities, prepare Form III and the project report, coordinate with RBI and handle post-approval compliance work. Where the work needs a practising CA or an advocate, a qualified professional signs it. The decision always rests with RBI, and we say so up front.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
RBI’s guidelines do not state an application fee. We list any government charges that apply in your quote.
Ready to begin?
Tell us your promoter profile and plan and we will say honestly whether a payments bank licence, a wallet or an NBFC fits you best.