InvestorQ : What are the activities payment banks can and cannot undertake?
Ishita Jain made post

What are the activities payment banks can and cannot undertake?

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Sadaf Khan answered.
1 year ago

Payment banks are a new model of banks that have started operating in India. These banks differ from conventional banks as they cannot lend to their customers. They can, however, provide simple financial products, take deposits, allow remittances, etc. The reason payment banks came into existence was to further the financial inclusion aim of the government. The reason for this is that there are still areas in the hinterlands of India where people don’t have any bank accounts and deal with cash directly. The Reserve Bank while granting license to payment banks stated: “The objectives of setting up of payments banks will be to further financial inclusion by providing (i) small savings accounts and (ii) payments/remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users.” Activities payment banks can undertake: • Offer internet banking, sell mutual funds, insurance and pensions. • Have business correspondents and ATMs. • Offer bill payment service for customers • They can enable transfers and remittances from a mobile phone. • They can offer forex services at charges lower than bank • They can provide forex cards to travellers, usable as debit or ATM card all over India. • They can also offer card acceptance mechanism to third parties such as “Apple Pay”. Activities payment banks cannot undertake: • Offer credit cards (because credit cards too are a form of loan) • Extend loans • Handle cross-border remittances • Accept NRI deposits