Banking Awareness : What is Payment Banks ?

What is Payment Banks

If you are preparing for any banking sector exams either it be IBPS PO, IBPS Clerk, SBI PO etc., you will come across Banking Awareness Section under which question are asked based on What is payment Banks, List of Payment Banks in India etc.

What is Payment Banks ?

A Payment Bank is just like other banks but it is operating on a very small scale and doesn't involve any credit risk.

In other words, Payment Banks are operating like other banks but it doesn't issue any loan or credit cards.

It can accept deposits ( upto a limit, i.e. Rs 1 Lakh ), offer mobile transfers, purchases, online payments as well as issue ATM, Debit cards, net banking and third party transfers.

Payment Banks are new category of bank conceptualized by Reserve Bank of India which operates digitally ( on mobile phones and other devices ) using internet rather than through physical branches.

History behind the origin of Payment Banks :

On 23 September 2013, Committee on Comprehensive Financial Services for Small Businesses and Low Income Households was formed under the governor Raghuram Rajan, headed by Nachiket Mor.

On 7 January 2014, the Nachiket Mor committee submitted its final report. Among its various recommendations, formation of a new category of bank called payments bank was also recommended.

On 27 November, RBI released the final guidelines for payment banks.

In February 2015, RBI released the list of all 41 entities which had applied for a payments bank licence.

On 19 August 2015, the Reserve Bank of India gave "in-principle" licences to eleven entities to launch payments banks.

Bharti Airtel launched India's first live payments bank named Airtel payment bank in March 2017.

Basic Features of Payment Banks :

The maximum deposits in Payments banks is limited to Rs. 100,000 per individual customer but may be it can be increased later.

Payments bank can offer both current accounts and savings accounts.

The minimum paid up equity capital for payments banks shall be Rs. 100 crore.

Payments banks do not issue credit cards. However, they do issue ATM and debit card.

The promoter shall contribute at least 40 percent of the paid up equity capital for the first five years from the date of commencement of the business.

The outside liabilities of a payments banks should not exceed 33.33 times its paid up capital and reserves.

25% branches must be in unbanked rural areas.

Payment Bank offers zero balance accounts or no minimum balance accounts without any extra charge.

Need to setup Payment Banks :

Their objective is to reach low-income households, small businesses mainly through mobile phones rather than traditional offices.

Provide banking facilities in unbanked rural areas.

It is an initiative by the government to increase financial services penetration level to remote areas of India.

The main objective of payments banks is to promote financial inclusion by giving services like small savings accounts, and payment or remittance services to migrant labour workforce, low-income households, small businesses and unorganized sector entities, as well as other users.

Services offered by Payment Banks :

Fund Transfer
Bill Payment
Recharge
Online Shopping
Fixed Deposit
Saving Account
Current Account
Utility Bill Payment ( Water Bill, Electricity Bill, Internet Bill etc. )

List of Payment Banks in India :

Reserve Bank of India ( RBI ) has issued license to eleven entities to launch payment banks in India which are as follows :

Aditya Birla Nuvo
Airtel M Commerce Services
Cholamandalam Distribution Services
Department of Posts
FINO PayTech
National Securities Depository
Reliance Industries
Sun Pharmaceuticals
Paytm
Tech Mahindra
Vodafone M-Pesa

Note : From the above eleven entities list, three entities Cholamandalam Distribution Services, Sun Pharmaceuticals and Tech Mahindra have surrendered their licenses.

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