Payment Banks

The Reserve Bank of India has first emerged with the idea of payment banks. For that purpose, RBI has formed an External Advisory Committee named ‘’The Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households’’ which in its final report recommended the idea of payment bank The Reserve Bank of India then established the rules for a payments banks.

An external advisory group was established to investigate and evaluate the licence application after the notice for the application was issued and the list of all 41 applicants who had applied had been submitted. As a result, "in-principle" licences were granted by RBI to 11 businesses out of 41 applicants.

This licence was valid for 18 months ; within that period, the entities were required to meet all requirements and weren't permitted for Banking activities in that period; then only they will be provided with a Full Licence by RBI under sec.22 of the Banking Regulation Act 1949, if satisfied. 

A payment bank does not take any sort of credit risk. Smaller units, including low-income households, migrant laborers, small business units, and unorganized sectors, are all given credit by this sort of bank. It does not provide customers with the option of receiving credit cards or advance loans.

The following are the services that the payments bank offers.

  1. Remittance service

  2. Automated Teller Machine Service

  3. Debit cards for money transactions

  4. Net banking service

  5. Bill payments service

  6. Mobile banking service

  7. Third-party fund transfer

The objective of payment banks:

The main objectives of the payment banks are to provide financial inclusion to the following sections.

  1. Low-income household

  2. Migrant labor workforce

  3. Small business

  4. Unorganized sector

It intends to offer savings accounts to people who are unable to open one because they are hesitant to pay high maintenance fees.

The Necessity for payment banks

Indian impoverished people's aid

In the past, poor people had a lot of difficulties when it came to financial transactions. We have seen that the majority of the impoverished relocate to towns in order to find employment. Sending money to their families in the village is difficult for members of this traveling class.

As a result, the payment bank offers clients a savings account that they can simply open and has connections to commercial banks that offer ATMs. Making a money transfer easy and smooth for poor people.

  • A savings account used to be quite expensive to manage, and if the required amount is not kept up, a fine is imposed. As a result, many in need were unable to create a savings account.
  • However, payment banks gave the underprivileged a chance to save their hard-earned cash.
  • In comparison to other commercial banks, payment banks offer greater interest rates. As a result, it boosts savings.