f&& testbook.com Payment Bank: Meaning, Objectives, Examples - Banking Awareness 2021/07/28 Payment Banks in India is another new category of banks introduced in the Indian banking sector by the Reserve Bank of India (RBI). Payment Banks aim to meet the credit and remittance requirements of small businesses, low income households, and the unorganized sector. The following banking awareness study notes on Payment Bank is an important topic not only for practical purposes but also from the exam point of view. Payment banks are like any other bank but operate on a smaller scale without involving any kind of credit risk. ‘The Reserve Bank of India issued draft guidelines for two new categories of banks, that is, the Small Finance Banks and Payment Banks. The payment banks in India aim to reach the customers mainly by way of smartphones instead of — the traditional bank branches. With payment banks, individuals can make payments to domestic help, milk men, newspaper vendor, etc. through the smartphone rather than paying in cash. Let us learn more about the Payment Banks in India as far as their meaning, definition, description, objectives, importance, and examples are concerned. Banking and finance aspirants are advised to read through the following sections carefully so as to prepare well for government competitive exams. Meaning & Definition of Payment Bank Nowadays, it has become much easier and quicker for people to make payments online. Rather, paying for online purchases, grocery shopping, and even making payments to house help is now a matter of seconds. It has come true with the onset of Digital Banking. One of the crucial aspects of digital banking is the payment bank. A payment bank works just like any other bank, but on a smaller scale. It does not involve any credit risks as such. Simply put, payment banks can carry out most banking functions, however, they cannot advance loans or issue credit cards to their customers. Payment banks also accept demand deposits of up to INR 1 lakh, offer remittance services, mobile payments/ transfers/ purchases, and other banking operations like ATM debit cards, third-party transfers, and net banking as well. DescriptionThe RBI constituted a committee headed by Dr. Nachiket Mor in September 2013 to study Comprehensive financial services for low income households and small businesses. The committee was constituted with the sole objective to propose measures for achieving financial inclusion and allow increased access to financial services. Accordingly, the committee submitted its report with one of its recommendations to introduce specialized banks or payment banks. The main aim of such banks would be to cater to the low income groups and small businesses so that each Indian resident is able to have a global bank account. Objectives of Payment Banks in India As per the RBI data, around 60% of the population in the country are still not connected with the banking sector, Moreover, it mostly includes lower income people living in the rural areas who work in the unorganized sector and migrate to the urban areas for employment. Hence, the main objective of the payment banks is to widen the spread of financial services and payments to low income groups, small businesses, and migrant labour workforce, It is said to be done in a secure and technologically enhanced manner, Check all the IBPS PO exam details here! Payments Banks = Scope Accepting demand deposits of up to INR 1 lakh per customer ._ Issuing ATM and debit cards but not credit cards «Payments and remittances by way of myriad channels «Acting as a Business Correspondent (BC) of another bank (subject to RBI guidelines) Distributing non-risk sharing simple financial offerings like pension and insurance products, mutual fund units, etc. Get free Bank Exam Practice Questions here! Salient Features” Payment banks almost function the same as the commercial ones, however they do not work under a few restrictions as elaborated below: Payment banks accept savings deposits from the people but the limit is fixed. That means, the payment banks can accept deposits up to a maximum limit of INR 1 lakh per customer. Payment banks are authorized to open both savings as well as current accounts of their customers. They are entitled to issue ATM or debit cards to the customers but not the credit card. «Payments banks cannot offer lending services or loans to their customers . Such banks cannot accept deposits from the Non Resident Indians.« Payments banks are allowed to make personal payments and receive remittances from the cross border on the current accounts ‘They are required to deposit the amount in the form of CRR (Cash Reserve Ratio) with the RBI just like the other commercial banks. The payment banks should invest a minimum of 75% of its demand deposits in the government sectirities/ treasury bills with maturity of one up to one year. They must also hold a maximum of 25% in current and fixed deposits with the other commercial banks for operations. «Payment banks also provide their customers with the facility to pay utility bills online ._ These banks are not permitted to open subsidiaries to undertake any activities related to the non- banking financial services «Payments Banks must include the word “Payments Bank” in their names to differentiate from the other banks. Only after seeking an approval from the RBI, payments banks can work as partners with the other commercial banks and sell mutual funds, insurance and pension products, etc. Eligible Promoters Following are the individual and/ or group of eligible promoters to set up payments banks in India: «Resident individuals/ professionals with around 10 years of experience in banking and finance Companies and societies Professionals from banking/ financial sector, NBFCs and MFIs that meet the “fit and proper” criteria Existing NBFCs (Non Banking Finance Companies) Micro Finance Institutions (MFI) Examples The RBI granted “in-principle” approval to around 11 applicants to establish payments banks in the country. Itis important to note about these banks for various banking exams like IBPS Clerk, SBI Clerk, IBPS PO, SBI PO, etc. Currently, only 6 of them are operational as below: «Fino Payments Bank Limited «NSDL Payments Bank Limited . India Post Payments Bank Limited Airtel Payments Bank Limited PayTM Payments Bank Limited . Jio Payments Bank Limited You might also be interested in: Prompt Corrective Action (PCA) study notes! We hope the above article on Payments Banks proves to be beneficial for banking and finance aspirants. Download and install the Testbook App for more such study-related resources. Get the app to access mock tests, practice sets, study material, live coaching and more right on your smartphone!Payments Banks FAQs Q.1 What are payments banks? Ans.1 Payment Banks aim to meet the credit and remittance requirements of small businesses, low income households, and the unorganized sector. Q.2 What is the core function of the payments banks? Ans.2 These banks can accept deposits and issue ATM and debit cards but not credit cards. They basically aim to empower the small enterprises, marginal farmers, and low income groups. Q.3 What are some of the popular payments banks in India? Ans.3 Airtel Payments Bank, Jio Payments Bank, NSDL Payments Bank, and NSDL Payments Banks are some of the most popular payments banks in the country. Q.4 What is the use of payment banks? Ans.4 Payments banks are set up to cater to the needs of small enterprises, marginal farmers, and low income groups of the population in India. Q.5 Who regulates the payments hanks in India? Ans.5 The RBI is responsible to regulate the payments banks in India testbook prem Classes een PDF erate) Or US ToS oti 299 ParadDiestbook The Complete Exam Preparation ala) cy