The Reserve Bank of India had recently put restrictions on Paytm Payments Bank, stopping it from offering additional banking services starting from March 2024. This action was taken due to concerns about regulatory norm violations. After February 29, Paytm Payments Bank was not allowed to accept deposits, conduct credit transactions, or provide top-ups for customer accounts, prepaid instruments, wallets, FASTags, and NCMC (National Common Mobility Cards), among other services.
What are payment banks?
Payment banks are financial institutions that operate similarly to regular banks but on a smaller scale and without taking credit risks. Unlike scheduled banks, payment banks cannot advance loans or issue credit cards.
In basic terms, it can do many banking tasks but cannot give loans or provide credit cards. It can take deposits on demand (up to Rs 1 lakh), provide services like money transfers through mobile, ATMs, debit cards, net banking, and handle third-party fund transfers.
How do payment banks and scheduled banks differ, and what services do they offer?
Payment banks and scheduled banks differ significantly in their scope of operations and the services they offer. Payment banks, operating on a smaller scale, are restricted from engaging in lending activities or issuing credit cards. Their primary focus is on providing basic financial services such as accepting demand deposits (up to Rs 1 lakh), facilitating remittances, and offering services like mobile payments, transfers, and purchases.
In contrast, scheduled banks, being full-fledged institutions, have a broader mandate that includes providing loans, issuing credit cards, and offering a comprehensive range of financial products and services. Scheduled banks do not have restrictions on deposit limits, whereas payment banks have a capped maximum limit per account.
Payment banks leverage technology and strategic partnerships to reach customers, often lacking an extensive physical branch network compared to scheduled banks. While payment banks aim to cater to the financial needs of the underserved population and promote financial inclusion, scheduled banks play a more comprehensive role in the economy, serving a diverse range of customers with a wide array of banking and financial solutions.
In terms of services, payment banks offer key financial services within a limited scope. They facilitate remittance services, simplify the process of transferring money, accept demand deposits up to Rs 1 lakh, provide mobile payments and transfers, issue ATM/debit cards, enable net banking, and handle third-party fund transfers. These services cater to the basic banking needs of customers, emphasizing accessibility and efficiency in their operations.
On the other hand, scheduled banks, being full-service institutions, provide a broader range of services, including lending activities, credit card issuance, and a comprehensive suite of financial products. They do not have the same restrictions on deposit limits as payment banks and typically operate with a more extensive physical and digital infrastructure to cater to a diverse clientele. Scheduled banks play a pivotal role in the overall economic landscape, offering a complete array of financial solutions to meet the varied needs of their customers.
Current list of payment banks in India
As per the information available on the NPCI (National Payments Corporation of India) website, there are currently 12 payment banks listed in the country. These include ESAF Small Finance Bank, Fino Payments Bank, Equitas Small Finance Bank, India Post Payment Bank, Suryoday Small Finance Bank Ltd., Ujjivan Small Finance Bank, AU Small Finance Bank, Jana Small Finance Bank, Airtel Payment Bank, NSDL Payment Bank, Paytm Payment Bank, and Fincare Small Finance Bank.
