A payments bank can act as a business correspondent of another bank but will not have access to the transferred funds available in the account of any customer at that bank, according to a Reserve Bank of India directive issued on Thursday.
RBI issued the directive to provide clarity on the ‘sweep out' arrangement, which it had mentioned in the operating guidelines for payments banks in October last year. At that time RBI had said that for deposits exceed Rs 1 lakh, the excess funds can be “swept” into an account opened in one of the payments banks' partner banks, but had not provided more details.
Simply put, if the balance in the payments bank account exceeds more than Rs 1 lakh, the excess money will automatically get transferred to the partnered bank, however it will not be automatically debited back from the partnered bank.
The decision was taken after proposals and comments received from payments banks, RBI said.
Payments banks cannot avail of intraday trading facilities with the balance in the partnered bank. However, as a business correspondent, payments banks can facilitate withdrawals and transfers by the customer with the other bank, according to the notification.
RBI also asked payment banks to closely monitor the accounts and report and suspicious transactions when the deposit/transaction volumes are not commensurate with the customer's profile.
Last month Paytm became the the third company to launch a payments bank. The company is also seeking a licence to set up a money market fund where users can store cash and earn interest, in competition with the country's banks, Founder and Chief Executive Officer Vijay Shekhar Sharma told BloombergQuint in an interview.
A payments bank can accept deposits of up to Rs 1 lakh per customer in a savings or current account, and offer other services such as debit cards and online banking. However, it cannot advance loans or sell credit cards.
Also Read: What India's Payments Banks Offer
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