Hello and welcome to another video. Today we will discuss about The 
Payment Banks 
A Payments bank is almost similar to other banks in service; one 
major difference, however, is – it operates on a smaller basis.
The Reserve Bank of India introduced this concept to increase the 
financial inclusion of small businesses, migrant labor force, and 
unorganized sectors. Payments banks shall confine their activities to 
remittance services, acceptance of demand deposits, and internet banking
remittance services, acceptance of demand deposits, and internet banking
“in-principle approval granted will be valid for the period of 18 months.
 Rather than traditional banking, the Payments banks operate their 
functioning through mobile phones
RBI has given the nod to 11 entities including, Sun Pharma, Airtel, 
PayTM, Tech Mahindra, Vodafone, and reliance industry. 
What payments banks can do
Accept demand deposits, i.e., current deposits, and savings bank 
deposits from individuals, small businesses and other entities
To hold a maximum balance of Rs one lakh per individual customer, 
interest is given on these balances. 
allowed to set up branches, ATMs and Banking Correspondents
Allowed to issue debit cards also offer internet banking. 
Can accept a large pool of money to be remitted but at the end of 
the day the balance should not exceed one lakh rupees
 Permitted to handle cross border remittance transactions in the 
nature of personal payments / remittances on the current account
 * Allowed to distribute mutual fund products, insurance products and 
pension products
Has to use the word ‘Payments Bank’ in its name to differentiate from 
other banks 
What payments banks cannot do
 No NRI deposits should be accepted 
 cannot issue credit card loans. 
Why the Payment banks are so important ?
It’s a step to redefine banking in India. The Reserve Bank expects 
payment banks to target India’s migrant laborers, low-income
households and small businesses, offering savings accounts and 
remittance services with a low transaction cost. It hopes payments 
banks will enable poorer citizens who transact only in cash to take 
their first step into formal banking. It could be uneconomical for 
traditional banks to open branches in every village but the mobile 
phones coverage is a promising low-cost platform for quickly taking 
basic banking services to every rural citizen. 
The innovation is also expected to accelerate India’s journey into a 
cashless economy. 
