What is a Payments Bank?

 

A Payments bank is a specialized bank which accepts deposits as well as provides fund transfer & remittance services. 

 

·       Payments Banks are not allowed to undertake lending activities so they cannot offer loans.

 

·       A Payments Bank can issue ATM/debit cards but cannot issue credit cards.

 

·       A Payments bank can accept a maximum amount of Rs.2 Lacs in deposit.

 

·       Payment Banks can also undertake distribution of simple financial products like mutual funds and insurance, etc.

 

Objective of Payments Banks

 

·       The objective of setting up payments bank as Reserve Bank of India states, is to

 

Facilitate financial inclusion by providing 

 

1) Small savings account and 

2) Payments/Remittance Services 

 

To migrant labour workforce, low income households, small businesses, unorganized sector entities and other users.

 

Regulatory Requirements 

 

·       The minimum paid-up equity capital for payments bank shall be Rs. 100 Crore.

 

·       Payments Bank is required to invest minimum 75% of its demand deposit balances in Statutory Liquidity Ratio (SLR) eligible Government Securities and Treasury bills with maturity up to 1 year.

 

·       Also keeping in view operational purposes and liquidity management, Payments Bank can keep maximum 25% of its demand deposit balances as deposits with other Scheduled Commercial Banks (SCBs).

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