Financial inclusion has always been a major motto of the Indian government. The latest way out to speed up the process is the payments bank entity. Following the recommendations of the Nachiket Mor Committee, RBI has granted temporary licenses to eleven organizations to operate as payments banks.
Despite having the status of a bank, their services are somewhat limited than that of traditional banks. Let us see what facilities these banks offer and don’t offer.
Bank Deposits
Like full-service banks, payments banks can take deposits from Indian residents but the maximum amount per person is restricted to Rs. 1 lakh. The banks pay interests on these deposited amounts.
These balances must be invested in government bonds or be deposited with commercial banks.
Accounts
With these banks, customers can only open current and savings accounts. There is no restriction on the income level to open an account and no need to maintain a certain level of balance. Besides having regular accounts in a traditional bank, one can open an additional account in a payments bank.
Small scale businesses can maintain salary accounts in these banks and avoid cash payments to their employees.
Loan and Credit Cards
These banks are not allowed to give loans or to issue credit cards. For such facilities, people still have to seek service of a traditional bank or of other financial institutions.
ATM Facilities
Payment banks are allowed to issue ATM and debit cards. These cards can also be used to withdraw money from other traditional banks’ ATMs. For international travelers, there is Forex card, having the same functionality of a debit card.
Bill Payment
Payments banks offer online utility bills payment option like any other traditional bank. But the process is more convenient.
Net Banking and Mobile Banking
Payments banks include online banking and mobile banking facilities. Using these, a customer can carry cashless and chequeless transactions. However, these banks can not be online-only banks.
Money Remittance
Payments banks also offer money remittance services. Money can be transferred from a payments bank account to other accounts using NEFT, IMPS and RTGS mechanisms. Compared to traditional banks, the cost of transfer is much less.
Issue of Financial Products
Payments banks can distribute only risk-free simple financial products like insurance and mutual fund units.
Additional Services
Forex service is also available at these banks. In addition, they perform as a bank correspondent of other banks.
Other Differences
Payments banks cater to the banking needs of low-income households, small businesses, the unorganized sectors of the economy and migrant labor force, not covered by the traditional banking system.
The start-up capital required opening a payments bank is much lower than that of a full-service bank. However, they must fulfill some other criteria like percentage of rural branches, minimum reserve requirement and promoter’s holding to get the full license of a payments bank.
These banks are not allowed to have subsidiaries or to perform non-banking activities. They must have highly efficient Customer Grievance Cells. They must also distinguish themselves carrying the phrase Payments Bank always with their name.
