RBI appointed a Committee for financial
services under Nachiket Mor for Payment banks.
The idea came from PPI..!!!! First of all what is PPI??
A) Pre –Paid Instruments Providers (PPI)
Pre-paid Instruments
are just like pre-paid SIM cards; you recharge them with the desired amount and
use it to perform various transactions such as shopping, paying bills, booking
tickets etc. Funds are added into the Pre-paid instrument by the direct bank
transfer or from the credit card of the holder.
·
PPI doesn’t offer
interest rate. From financial inclusion point of view, this doesn’t help the
poor people and small businessmen save their money.
·
PPI
is a nested payment model: you
give money to PPI, they deposit it in an escrow account in some bank. Every
time you do something using digital wallet, they take out money from that
escrow account and pay on your behalf. What’s the problem?
·
Problem is nested
models= they increase “contagion risk”.
·
Contagion risk = bad
thing happens @one place, then it also leads to more negative outcomes @other
places in the market.
Who are
Pre –Paid Instruments Providers (PPI)
Airtel
money is an example of PPI.
What do they do?
·
You give them money
(from your regular bank account)
·
They give you a
“digital wallet” tied with your mobile.
·
You can use it to pay
bills, shopping, movie tickets etc.
What are the features/characteristics of such
PPI?
·
They’re regulated by
RBI under Payment and Settlements Act of 2007.
·
KYC norms apply.
·
You don’t earn
interest rate on the money saved in it
·
You can put maximum
Rs.50000 in it.
·
You cannot ‘pull out’
money from it. (Meaning you’ve to spend. You cannot ask for refund in cash.
Except under some special models/schemes.)
·
Transaction fee
applies. Every time you buy something using your Airtel Money account, they
charge ~0.5% as commission.
Other examples of PPI:
·
Airtel money, Oxigen
Prepaid cards.smart cards of BP
·
Paypoint, Zipcash,
flipkart wallet, Paytm, Mobikwik
·
The money added in the
Pre-paid instruments does not earn any interest. So the small businessman and
poor people did not like PPI.
·
Once money added to
the PPI, it cannot be transferred back to bank or any other PPI, holder has to
spend it.
·
Money added in the PPI
is not as safe as in bank account.
·
Further, every
transaction through the PPI attracts a fee of 0.5% as commission and the
maximum limit of the money which can be added to the PPI Rs.1 lakh (earlier
Rs.50,000).
Therefore,
Nachiket Mor Committee recommends:
1.
RBI should NOT give
any more licenses to open PPI.
2.
Still, If anyone is
interested, RBI should ask him to become a Banking business correspondent OR
apply for Payment Bank license.
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