2. Payment Banks
The concepts of payment banks are brought forward by the Reserve Bank of India. This concept was brought forward by the
Committee on Comprehensive Financial Services for Small Business and Low Income Households. Then the Reserve Bank of India
framed the guidelines for the payments of the bank. Then notice for the application was given and after the submission of the list of all
41 applicants who had applied, the list was published. Then an external advisory committe was set up to look into the licence
application and to make the evaluation. Then 11 entities out of 41 applicants were selected and were given “in-principle” licence. This
licence had the validity of 18 months and within the period the entities had to fulfill all the requirements and failure would be led to
lapse of licence.
3. The services provided by the payments bank are
1. Remittance service
2. Automated Teller Machine Service
3. Debit cards for money transaction
4. Net banking service
5. Bill payments service
6. Mobile banking service
7. Third party fund transfer
4. Objective of payment banks
● To provide financial inclusion to
1. Low-income household
2. Migrant labour workforce
3. Small business
4. Unorganized sector
● It aims to provide saving accounts to those who are not able to create a savings account as they are afraid to pay heavy
maintenance.
5. Importance of payment banks
Aid to poor in India
● Earlier days poor people used to face a lot of problems in the matter of money transactions. We have seen that most of the poor
people leave their village and settle in towns to earn money. The people belonging to this migrating class face hurdles in
sending money to their families back in the village.
● Thus the payment bank provides them with a saving account, which can be opened by them easily and it has tie-ups with
commercial banks which provide ATM. Thus making money transfer easy and smooth for poor people.
● Earlier maintaining a savings account used to cost a lot and if the person fails to maintain the mentioned amount, they are fined.
Thus poor people were not able to open a savings account.
● But payment banks provided scope for the poor to save their hard earned money.
● Payment banks provide a higher rate of interest than other commercial banks. Thus it increases the amount of savings.
6. Alternative of traditional banks
● Rural areas have always been neglected and thus the people of rural areas face a lot of problems. Village people need to travel
to cities to get their money transactions done. This is because traditional banks do not open branches in small villages.
● Opening a traditional bank in every part of India puts an effect on the economy, thus it is not possible to open more branches in
areas with less population. But it is not mandatory for the payments bank to open branches in every part as they can operate
through mobile phones.
● The people just need to complete their KYC and link their Aadhaar card to their number and they can easily send and accept
money in their account through online transfer.
● Payments bank provide interest on small amounts even, thus it increases the savings
