Overview of Payments Banks in India www.deekpay.com

payment bankis a financial institution launched in India in 2014 to provide basic banking services to the under-served and unbanked population. Payments banks offer a limited range of products and services focused on facilitating financial transactions and promoting financial inclusion. Unlike traditional banks, payment banks cannot issue loans or credit cards. Their main function is to provide secure and convenient banking services such as deposits, withdrawals, remittances and payments through digital channels.

What is a payment bank?

In accordance with the recommendations of the Nachiket Mor Committee.Payments Bank of Indiawas established to conduct business on a smaller scale and with minimal credit risk.

The main objective is to promote financial inclusion by providing banking and financial services to unbanked and underbanked areas, helping mobile labour force, low-income families, small entrepreneurs, etc. They are registered under the Companies Act, 2013, but are governed by a range of legislations such as the Banking Regulation Act, 1949; Reserve Bank of India Act, 1934; Foreign Exchange Management Act, 1999, Payment and Settlement Systems Act, 2007, etc.

Characteristics of Payments Banks in India

Payments Bank of India is a special type of bank that performs only limited banking operations as permitted under the Banking Regulation Act, 1949. The main features include:

They are differentiated banks, not full-service banks. These banks are smaller in size. It is required to have a minimum paid-up capital of Rs. 100,00,00,000. The minimum initial contribution of the promoters to the Payments Bank shall be at least 40% of the paid-up share capital of the Payments Bank for the first five years from the commencement of the business of the Payments Bank.

Operations that can be performed by payment banks

The Payments Bank can accept deposits up to a maximum of Rs 200,000. It can accept demand deposits in the form of savings and current accounts. Deposits received can only be invested in guaranteed government securities in the form of Statutory Liquidity Ratio (SLR). This must be up to 75% of the demand deposit balance. the remaining 25% will be placed as time deposits with other scheduled commercial banks. Payment banks will be allowed to make personal payments and receive cross-border remittances on current accounts. It may issue debit cards.

Businesses that cannot be carried out by payment banks

Payment bank fromReserve Bank of IndiaObtained a "differentiated" banking licence and therefore could not lend. Payment banks cannot issue credit cards. It cannot accept time deposits or NRI Deposit. It cannot issue loans. It cannot set up subsidiaries to engage in non-banking financial activities.

Advantages of Payment Banks

Expanding rural banking and financial inclusion. Expansion of the formal financial system. Effective alternatives to commercial banks. Efficient processing of low-value, high-volume transactions. Access to diversified services.

What is the difference between a normal bank and a payment bank in India?

Payments banks in India share some similarities with traditional commercial banks, but differ significantly in scope and services offered.

The main difference:

Products: Commercial banks offer a wide range of financial products, including loans, credit cards, investment products and insurance, while payment banks are limited to basic banking services such as deposits, withdrawals, remittances and payments. Deposit limits: Payment banks have a maximum deposit limit per customer, while commercial banks have no such limit. Investment limits: Payments banks invest primarily in government securities, while commercial banks have a broader portfolio. Loan services: commercial banks offer a variety of loan products, including personal loans, housing loans and business loans, while payments banks cannot offer any form of credit. Branch network: Commercial banks typically have a larger and more extensive branch network than payments banks, which typically rely on correspondent banks to extend their reach.

Indian Payments Bank Regulatory Provisions

The regulatory framework for payments banks includes the following elements:

Licence requirements: the Reserve Bank of India offers licences to eligible entities (e. telecom companies,Non-Banking Financial Companies, andPrepaid payment instruments(issuers, etc.) to grant licences, subject to certain conditions and criteria. Guidelines: Payments banks are required to maintain a minimum paid-up share capital of Rs. 1 crore, at least 51% shares held by resident Indians, have a diversified board of directors and comply with corporate governance and prudential norms. Supervision: The Reserve Bank of India monitors the operations, performance, compliance and risk management of payment banks through periodic reports, inspections, audits and reviews. The Reserve Bank of India also has the power to impose fines, revoke licences or take other corrective measures in case of any irregularities or violations by the payment banks.

List of Payment Banks in India (2024)

There are currently 6 payment banks in India which are Airtel Payments Bank, India Post Payments Bank, Fino, Paytm Payments Bank, NSDL Payments Bank and Jio Payments Bank.

Payments Bank HQ Features Airtel Payments Bank New Delhi India's first payments bank (January 2017) with an extensive network of over 500,000 banking outlets through Airtel retail outlets offering 2.5% interest rate on savings accounts and free personal accident insurance of Rs. 10 lakh.Paytm Payments Bank Noida is integrated with the Paytm app and has over 350 million registered users, offering 2.5% interest rates on savings accounts, cashback and transaction rewards. india Post Payments Bank New Delhi leverages the post office network to focus on the rural and low-income population, offering a range of financial services beyond banking. fino Payments Bank Mumbai has a strong presence among rural and low-income populations (70% of its customer base), offering 5% interest rates on savings accounts, micro ATMs and doorstep banking.Jio Payments Bank Mumbai is integrated with the Jio ecosystem, and leverages the potential of the telecom network to have a large subscriber base, focusing on digital payments and financial services. NSDL Payments Bank Mumbai is technology-driven and backed by National Securities Depository Limited, offering products and services linked to the financial markets.

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