PAYMENT BANKS

K.AKHILA
1982463016
 INTRODUCTION
• Payment banks are a new type of
financial institution in India that was
introduced in 2014.
• The Reserve bank of India (RBI)
established the concept of payment
banks after the Nachiket Mor
committee recommended it in its
report in January 2014.
• They can only offer savings account,
current accounts, and mobile
banking services.
MEANING
• The Reserve Bank of India (RBI) defines payment banks as a new
model of banks that offer basic banking services to the unbanked and
underbanked population.
• Payment bank is a new form of bank accepted by Reserve bank of
India for making payments, which cannot issue credit. These banks
can accept a restricted deposit, which is currently limited to 2,00,000
lakhs per customer and may be increased further.
• These banks cannot issue loans and credit cards.
PAYMENT BANKS DESIGNED TO:
• To promote financial inclusion: Payment banks focus on making
banking services accessible to people who might not otherwise have
access.
• Provide basic banking services: Payment banks offer services like
deposits, withdrawals, remittances, and payments.
• Operate digitally: Payment banks provide digital access to banking
services through mobile banking, net banking, and UPIs.
LIMITATIONS OF PAYMENT BANKS
Payment banks have some limitations compared to traditional banks
• No loans or credit cards: Payment banks cannot issue loans or credit
cards.
• Limited deposits: Payment banks have a limit on the amount of
deposits a customer can make.
• Restricted services: Payment banks offer a limited range of products
and services.
FEATURES
Payment banks offer a range of basic financial services to the
underbanked and unbanked population.
• Deposit Accounts: Customers can open savings and current accounts
with a maximum balance limit of ₹200,000.
• Debit Cards: Payment banks issue debit cards for ATM withdrawals
and POS transactions.
• Money Transfers: Facilitate domestic and international bank transfers
of funds through various modes, such as NEFT (national electronic
fund transfer), IMPS (immediate payment service), UPI (unified
payments interface), and AEPS (Aadhaar-enabled payment systems
• Mobile Banking: Offering convenient banking services through
mobile apps, including balance inquiries, fund transfers, and bill
payments.
• Agent banking; Expanding reach through a network of business
correspondents in rural and semi-urban areas.
• Basic Financial Services: Providing essential services like utility
bill payments, mobile recharges, and insurance products.
• Investment Restrictions: Funds are primarily invested in
government securities with a maturity period of up to one year.
• Leverage of Technology: Employing biometric authentication,
QR codes, and NFC technology to enhance security and
convenience for customers.
• Partnerships and Collaborations: Payment banks collaborate
with financial institutions and service providers to offer a wider
range of financial products, such as insurance, mutual funds,
and pensions, enhancing their service offerings.
OBJECTIVES
• According to RBI, almost 60% of the people of the country are still
not connected with banking services. The data says the people with
lower income, who live in rural areas work in unorganized sector.
Following are the objectives of payment banks
1. The main objective of setting up of a payment bank is to ensure the
financial inclusion to migrant labour work force by providing
payments and remittance services.
2. Opening up small saving a/c of small business holder, low income
households and workers of unorganized sectors.
3. Increase in government revenue.
4. Timely payments of bills.
5. Trade relations became stronger.
6. E-Trade and E-commerce increases.
7. Liquidity of money also increases.
8. Banking deposits will increase.
9. The economic developments of the company is possible.
REGULATIONS UNDER PAYMENT
BANKS
• capital required should be Rs. 100 crore.
• For the first five years, the promoter contribution should be at least
40%.
• Other entities except for promoters will not be allowed to have
shareholding of more than 10%.
• Any acquisition of more than 5% will need approval from the RBI.
• The payment bank has to be fully networked and technology driven
from the time of its commencement.
• The majority of bank's board of directors should include independent
directors who will be appointed as per the guidelines of the RBI. It
should also have to comply with the "'fit and proper' criteria meant
for Directors as issued by the RBI.
• 25% of its branches have to be in the unbanked rural areas.
• They must use the term "payment bank" so as to differentiate it from
other type of banks
PAYMENT BANKS LIST
The first payment bank in India, Airtel
Payments Bank, was established in
January 2017.
Other payment banks include:
1. Reliance industries
2. Vodafone M-pesa
3. Tech Mahindra
4. Chola-mandalam Distribution
services
5. Aditya Birla Nuvo Bank
HOW PAYMENT BANKS WILL AEFECT
EXISTING BANKING SECTOR
• The payments banks will help reach out to the people in rural areas where
banking system is not very effective.
• This way they will bring the unbanked masses under the ambit of general
banking.
• They will also ensure that more money comes into the banking system and
hence will expedite financial inclusion.
• They will also be helpful in making the poor more financially literate.
• With the advent of these new set of banks the existing top-notch banks will
not be affected much as payment banks will operate in specific areas only.
• Also, the major banks in India could use these banks to improve their reach
in every part of the country, as the payment banks can also function as
business correspondents.
THANK YOU