Payment Banks and Payment Systems Questions and Answers

Answer: B

Correct answer: Banking Regulation Act, 1949

A payments bank is licensed under the Banking Regulation Act 1949, the statute governing all banking companies in India, with the differentiated character coming from the conditions attached to the licence. The Payment and Settlement Systems Act 2007 governs payment systems such as RTGS and NEFT, which is a different subject and a common confusion.

Answer: B

Correct answer: 40 %

The promoter’s minimum initial contribution to paid-up equity capital is 40 per cent, held for the first five years from the commencement of business. Thereafter it may be reduced on the schedule the Reserve Bank prescribes, so the commitment is heaviest during the years in which the bank is establishing itself.

Answer: B

Correct answer: NPCI

The National Payments Corporation of India was set up in 2008 as an umbrella organisation for retail payments, promoted by the Reserve Bank and a group of banks under the Payment and Settlement Systems Act. It operates UPI, IMPS, RuPay, NACH, AEPS and the National Financial Switch, and it is a not-for-profit company rather than a regulator.

Answer: B

Correct answer: Payment and Settlement Systems Act, 2007

The Payment and Settlement Systems Act 2007 gives the Reserve Bank the authority to regulate and supervise payment systems in India, and everything from RTGS and NEFT to card networks and UPI operates under it. The Reserve Bank of India Act 1934 constitutes the central bank itself, and the Banking Regulation Act 1949 governs banks as institutions - a distinction worth keeping clear.

Answer: B

Correct answer: Satish Kumar Gupta

Satish Kumar Gupta was appointed Managing Director and Chief Executive Officer of Paytm Payments Bank in October 2018, having previously worked at the State Bank of India. He succeeded Renu Satti, who had led the bank from its launch in 2017.

Answer: B

Correct answer: Rs 500 crore

A payments bank whose net worth reaches Rs 500 crore is treated as systemically important and becomes subject to the additional regulatory requirements that follow - enhanced disclosure, governance and supervisory attention. The threshold recognises that a payments bank of that size handles enough of the payment system for its failure to matter beyond its own customers.

Answer: C

The Clearing Corporation plays the crucial role of a Central Counter Party (CCP) in the government securities, USD -INR forex exchange (both spot and forward segments) and Collaterised Borrowing and Lending Obligation (CBLO) markets 

Answer: C

Correct answer: Airtel Payments Bank

Airtel Payments Bank was the first to commence operations, opening in Rajasthan as a pilot in late 2016 and launching nationally in January 2017. India Post Payments Bank followed in 2018, and Paytm, Fino, Jio and NSDL in between and after. The telecom operators moved first because they already had the distribution network the model depends on.

Answer: B

Correct answer: RBI

Oversight of payment and settlement systems is a statutory function of the Reserve Bank under the Payment and Settlement Systems Act 2007, covering authorisation, regulation, supervision and the setting of standards. NPCI is one of the entities overseen, operating retail systems under an authorisation the Reserve Bank granted; it is an operator, not a regulator.

Answer: C

Correct answer: Lending Money

Lending is the one activity a payments bank cannot undertake at all. It may accept deposits within the cap, make payments and remittances, pay utility bills, issue debit cards and distribute mutual funds and insurance as an agent. Every source of income it has therefore comes from investment returns and fees rather than from a spread on credit.