Tag Archives: Reserve Bank of India

In India soon Bank Licenses will be ‘ON TAP’ basis

After NaMo Government swearing in ceremony, the thought process on differentiated banking licenses for the Indian populace is gaining ground.

The voice for more variety in Indian Banks is growing stronger day by day. Hence, Reserve Bank of India (RBI) in the near future will come out with policy guidelines for differentiated banking licences.

The new licences for banking operations including differentiated ones would be given “on tap” basis, R Gandhi, Deputy Governor of the Central bank said.

“We are currently working on the guidelines. Once we are done, we’ll take feedback and then the final announcement will be made,” Gandhi said on the sidelines of ICC Banking Summit.

“The new guidelines on different types of banks – universal, differentiated, etc – will be issued shortly. After these guidelines are issued…we intend to offer licences on tap,” he added.

Differentiated licences are those that come with restrictions on geographical reach or products offered by a new bank; and these include niche ones like retail banks or payments banks.

Once the guidelines are announced, there will be more clarity on the type of specialized banks Indians can look forward too.


Indian GIRO Advisory Group – My views


This is with reference to the Report of the GIRO Advisory Group, wherein comments from general public were invited.

The following are my comments:

01)            Unique ID for every customer:

a)    Each Biller has a unique allotted to their customers under which various sub-accounts are operated. Each customer in the Bharat Bill Payment System domain should be allotted a unique number. The number has to be quoted by the customer while entering into a service contract with the biller. This unique number can be compared with the “Unique Customer Identification Code for banks’ customers in India”, as advocated by Reserve Bank of India vide Notification No: RBI/2011-12/594 DBOD. AML.BC. No.109/14.01.001/2011-12 dt.June 08, 2012.

b)   In the initial stages this number might be kept optional, as the rural customers might find it difficult to adhere to this rule. However, incentives should be offered to customers who opt for the Unique Number.

c)    All the Billers should populate this number while on boarding new customers and aim to migrate the existing customers in a reasonable time-frame.

d)   This unique number will be beneficial to students as the education timeline can be tracked over a period of time, thereby reducing educational certification fraud.

e)   This unique number can also be incorporated for scholarship payments i.e the same number can be utilized for receipts and payments into a customer’s account

f)    Over a period of time, it is expected that substantial sensitive data will be associated with the Unique Numbers. Hence, appropriate access levels to be in place.

02)            Loyalty Points:

a)    To motivate quick migration of customers to the BBPS graded loyalty points should be introduced.

b)   The loyalty points to start with registration of the customer and be added as and when payment is made.

c)      Loyalty points can be redeemed against Outstanding Bills.

3) Billers: The scope of the billers can be extended. Payment can be on a generated bill or on demand.

a) Monthly Railway season tickets

b) Monthly Bus passes

c) Metro season passes

d) Monthly Toll way passes

e) Religious institutions

f) Club / Association fees

g) Monthly Maintenance charges of housing societies

h) Cinema Tickets

i) Event Tickets

j) Life Insurance

K) Non-Life Insurance

l) Magazine subscriptions


4) Single BBPS website:

a) Multiple payment modes should be made available viz Debit Card, Credit Card, Net Banking, Semi-closed cards, IMPS.

b) Each payment is authorized through OTP (One-Time Password).

c) This OTP can be in addition to the authentication done by the Payment provider.

5) APPS :

a) Appropriate APPS be developed for BBPS payments.

b) The focus should be on fewer footfalls at Customer Service Points (CSPs)

6) Gas Companies – Special Category

a) A substantial amount of cash is collected by LPG Gas Agencies and deposited at the Banks. The cash collection will be double in case the subsidy amount is also included.

b) Concerted efforts should be made to migrate the cash payments to the LPG Gas agencies to the BBPS platform. This will substantially reduce the retail cash collections in our country.

c) Option: –  i) BBPS to have a eWallet. ii) LPG cylinder amount to be blocked on LPG refill booking. Iii) On delivery, the amount to be released and transferred to the LPG company.

07) Late Payments:

a) Late payments up to a certain number of days after the due-date should be accepted.

08) Settlement model:

a) Settlement Model B is preferable

09) BBPS Head Office:

a) It should be in Hyderabad,

b) IDBRT is already in Hyderabad

c) Centralization in Mumbai is avoided

10) Security:

a) Billers should have access to the billing information of only their services

b) They should not have access to the billing information of other service providers, as the data might be misused

c) No companies should be allowed to scan the billing information especially credit agencies

11) ACH (Debit) Integration:

a) Customers would have given ACH (Debit) mandates to the billers. Online updation of ACH transactions should be in place

b) Once the bill amount is received through ACH (Debit) mode, no demand for the same bill to be made on the BBPS platform

12) Complaint Resolution:   

a) The website to have a complaint resolution module.

b) Customers to be penalized in case of frivolous complaints.

Concept Paper – What is good for India- Cash Withdrawal through ATMs or POS Terminals?

The following is the ATM usage pattern in India


It may be noted that the average ticket size is Rs3,200/-. Averages are not a good statistics tool to measure data, as the average figure might be skewed. However in the absence additional information on ATM transactions in the public domain, I have relied on the RBI published data.

Cost of running an ATM :

Two types of costs are associated with ATMs.

01)Capital Cost – ATM Machine Cost, ATM premises Cost

02)Running Cost – ATM premises rent, ATM Security guards salary, Electricity, Housekeeping

The only benefit of ATMs is the option for Pin Change and Mini Statement.  There are other options too viz

01)Phone recharge

02)Tax payment

03)IMPS transactions

04)Cheque book request

However, with mBanking picking up, the above set of transactions can be migrated to mBanking.

Cost Comparison of ATM vs POS Terminal

Sr No Type of Cost ATM POS Remarks
01 Machine Acquisition Cost Yes Yes POS is 90% cheaper as compared to ATM
02 Premises Cost Yes No POS terminals are part of a commercial establishment, no dedicated premises are required
03 Security Guard Yes No POS terminals are part of a commercial establishment, no dedicated premises are  required
04 Electricity Yes No Minimal electricity cost
05 Housekeeping Yes No POS terminals are part of a commercial establishment, no dedicated premises are  required
06 Cash Replenishment Yes No Physical cash is available at the commercial establishment, as and when cash sales are made


07 Encourage Less Cash transactions No Yes Customers can pay for their purchases through POS terminals instead of cash
08 Reduce carbon emission No Yes  
09 Reconciliation issues Yes No Reconciliation issues at POS terminals will be minimum as to complete a POS cash withdrawal transaction, a human has to hand over the cash


Long back in 2009, Reserve Bank of India issued guidelines on Cash Withdrawal at Point of Sale Terminal

Many Banks have commenced this facility, however due to various reasons the volumes did not pick up.

A concerted effort by all the Banks under the umbrella of Indian Banks Association would go a long way in migrating transactions from ATMs to POS Terminals.

Some pointers:

a)    Standardized Display board at establishments offering Cash Withdrawal facility through POS Terminals.

b)   Ensuring 100% uptime

c)    Double/Triple reward points for cash withdrawals through POS terminals.

d)   Short Educational videos

Reserve Bank of India cancels the Licence of The Urban Co-operative Bank Ltd. (Bhubaneswar)

The Urban Co-operative Bank Ltd., Bhubaneswar was granted a licence by the Reserve Bank of India on September 7, 1987 to conduct banking business under Section 22 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies).

On liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of Rs1,00,000/- (Rupees one lakh only) from the Deposit Insurance and Credit Guarantee Corporation under usual terms and conditions.

The first hint of trouble was noticed in the cooperative bank in the Statutory Inspection of Annual Accounts 2002-2003.
Gross and Net Non-Performing Assets (NPAs) of the bank at 39.4% and 31.9% respectively. The bank had sanctioned loans to its Directors and their relatives in 14 accounts and with the exception of one account, all accounts became NPA.

The bank’s revival plan submitted on January 15, 2009 was also not found satisfactory. The bank was given time to explore the possibility of a merger with any other strong UCB in or outside the State of Odisha. However, the bank failed to come forward with any viable merger proposal.

The statutory inspection as on March 31, 2009, 2010 and 2011 also indicated no improvement and the bank continued to function in violation of the provisions of Section 11(1) and 22 (3) (a) of the Act ibid.

A fresh SCN for cancellation of licence was issued to the bank on September 6, 2011 after reviewing its financial position as on March 31, 2011. The bank had not submitted its reply to the SCN and sought extension of time to materialize its merger proposal.

In the meantime, the statutory inspection was conducted with reference to the bank’s financial position as on March 31, 2012. The proposed merger did not materialize, with the acquirer bank withdrawing in January 2013.

The bank in its reply to the latest SCN issued on May 31, 2013 submitted that it would comply with the various sections of B. R. Act, viz Section 11, 22(3) on successful implementation of One Time Settlement (OTS) scheme and infusion of share capital of Rs10.00 crore from the State Government though there was no commitment from the State Government to this effect.

The bank emphasized that by implementing OTS / SARFAESI Act, it intended to collect Rs 1130.52 lakh by March 31, 2014. Considering the poor track record of the bank on recovery front, the projected target of recovery was found not realistic.

The bank in its reply also stated that a society has expressed their willingness to take over the management of the bank. The proposal was examined by Reserve Bank of India, but not found acceptable due to violation of BR Act provision.

Over the years from the facts and circumstances surrounding the Bank, it was observed that:
• The bank does not comply with the provisions of Sections 11(1) and 18 of B.R. Act
• The bank is not in a position to pay its present and future depositors and the affairs of the bank are being conducted in a manner detrimental to the interest of the present and future depositors and thus the bank did not comply with Section 22(3) (a) and 22 (3) (b) of the B.R. Act.
• The financial position of the bank leaves no scope for its revival.
• Public interest would be adversely affected if the bank is allowed to carry on its business any further.
• The bank has not taken any positive steps on capital augmentation and financial restructuring and there is no concrete / viable revival plan. Merger proposal with any other sound bank is also not forth-coming.
• In view of the above, the licence granted to the bank to conduct banking business deserved to be cancelled. Accordingly, the licence dated September 7, 1987 granted to The Urban Co-operative Bank Ltd., Bhubaneswar, Odisha to conduct banking business in India under Section 22 of the Act has been cancelled.
• With the cancellation of licence and commencement of liquidation proceedings, the process of paying the depositors of The Urban Co-operative Bank Ltd., Bhubaneswar, Odisha will be set in motion subject to the terms and conditions of the Deposit Insurance Scheme.

Consequent upon the cancellation of its licence, The Urban Co-operative Bank Ltd., Bhubaneswar, Odisha is prohibited from carrying on ‘banking business’ as defined in Section 5(b) of Banking Regulation Act, 1949 (AACS) including acceptance and repayment of deposits.