Payments Banks In India - Terms, List, Objectives, Features, and FAQs

Payment banks meaning is quite simple as a payments bank is like any other bank. The only difference, contrary to other banks, is the functions of payment banks in a way that how it operates on a smaller scale without involving any credit risk. Simply, it can conduct most banking operations but can’t issue credit cards or advance loans. A payment bank can accept demand deposits (up to Rs 1 lakh), provides remittance services, mobile purchases/payments, mobile transfers, and other banking services like ATM/debit cards, net banking, and third-party fund transfers.

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Important Terms Associated With Payments Bank 

• Promoter: Any individual involved in establishing and funding a new company.

• Paid-up Capital: Sum of money for which shares of the Company are issued to the shareholders and payment has been done by the shareholders.

• Credit Risk: Risk of loss or default that occurs from the debtor being improbable to repay the loan amount.

How Many Payment Bank In India

If you want to know how many payment banks in India are currently operating in the country, then scroll below. At present, the total number of payment banks in India are 6 in number. The number of payment banks operating in India was 11 initially. The guidelines issued by the Reserve Bank of India for the inception of payment banks were issued on 24 November 2014. Payment banks will be granted permission to open a current account and savings account, but they can't issue a credit card.

Payment Banks List

Below is the list of payment banks in India, along with the features of payments banks.  The payments banks are basically “differentiated banks” when compared to commercial banks. Reserve Bank of India had directed guidelines on November 24, 2014, for establishing payment banks in the country.

The Payments banks will fulfill the requirements of the public with some limitations; like the payments, banks will be sanctioned to open the saving accounts and current but can't issue a credit card to the customers.

RBI, on November 27, 2014, has permitted “in-principle” approval to the following 11 applicants to establish payment banks in the country. Currently, only 6 banks are operating namely:

1. Airtel Payments Bank Limited

2. Fino Payments Bank Limited

3. Jio Payments Bank Limited

4. India Post Payments Bank Limited

5. NSDL Payments Bank Limited

6. Paytm Payments Bank Limited

Above is a list of payment banks in India that are currently working.

Objectives Of The Payments Banks In India

As per the Reserve Bank of India (RBI) data, about 60% of the people of the country are still not linked with the banking sector. This takes into account many lower-income people; who reside in rural regions of the country, operate in unorganized sectors, and commonly migrate to cities/abroad in search of a job.

The main objectives of establishing payments banks are to ensure financial inclusion by offering payments/remittance services to the migrant labour workforce, opening up small savings accounts of low-income households, small business holders, workers of the unorganized sector.

Features Of Payments Banks

Payments banks will do almost all the work that is presently being performed by the commercial banks, but the payments banks will function under certain limitations like;

1. Similar to the commercial banks, the payment banks will also accept the money of the people as a deposit; however, the limit will be fixed, which implies that the payment banks can accept deposits up to a maximum of Rs. 1 lakh from a customer.

2. Payments banks should use the term "Payments Bank" in their names to appear different from other banks.

3. Payments banks will be entitled to open both current accounts and savings accounts of their customers.

4. Payments banks will be authorized to issue ATM or debit cards to their customers but do not possess the authority to issue a credit card.

5. Payments banks cannot offer loans or lend services to customers.

6. Payments banks are required to deposit the amount in the form of a Cash Reserve Ratio (CRR) with the Reserve Bank of India as other commercial banks do.

7. Payments banks are not entitled to accept deposits from the Non-Resident Indians (NRIs). It implies that the people of Indian origin who have settled abroad do not possess the right to deposit their money in the payment banks.

8. Payments banks will be granted to receive remittances and make personal payments from cross-border on the current accounts.

9. Payments Banks will be entitled to invest at least 75% of their demand deposits in government securities/treasury bills consisting of maturity of up to one year and hold a maximum of 25 % in fixed deposits and current accounts with other commercial banks for operational purposes.

10. Payments banks will be authorized to offer mobile banking and internet banking facilities to their customers.

11. Payment banks will have the authority to provide Facility of utility bill payments to their customers and the general public.

12. Payments banks will not be authorized to open subsidiaries for the purpose of undertaking Non-Banking Financial Services activities.

13. Payments banks can become a business representative of any other bank, but it will have to abide by the guidelines of the RBI.

14. Payments bank along with approval from RBI will be authorized to operate as a partner with other commercial banks and also can sell mutual funds, insurance products, and pension products.

15. The payments banks will be entitled to accept remittances to be sent to or receive remittances from multiple banks via payment processes approved by RBI, such as NEFT / RTGS / IMPS.

The establishment of the payments banks in India will not only increase the financial inclusion in the country but also reinforce the weaker section of the country in a way that they can also provide their contribution to the economic development of the country.