Role of Payment Banks in India

Abstract

A Payment bank is a bank which operates on a smaller scale. It is generally a non-full service niche bank in India. It is a bank that will undertake only limited banking functions which are allowed as per the Banking Regulation Act of 1949. The Reserve Bank of India (RBI) introduced it in 2014 to increase the scope of financial inclusion to small savings account holders, low income households, small businesses, unorganised sector entities and migrant labour force. The licenced entities as payment banks could only receive deposits and offer remittances. They cannot undertake lending activities. These banks are allowed to take cash deposit of maximum Rs. 1 lakh per individual. It can enable transfers and remittances through a mobile phone. It also offers services like automatic bill payments and digital purchased through the mobile phone. It provides debit cards and ATM cards that can be used on ATM network of all banks Payments bank will ensure more money comes into banking system. Various banks are looking at increasing their rural reach, including big banks like SBI.