All about Payment Banks

July 31, 2019

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This article is written by Soma-mohanty of KIIT School of Law, Bhubaneswar. In this article she has mentioned about the establishment of Payment Banks, how it has helped economically backward people, about the advantages and objectives of the Payments Bank and the list of Payments Bank working in India so that people can access them easily. 

 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.

The notice for the application was given and after the submission of the list of all 41 applicants who had applied, the list was published after which an external advisory committee was set up to look into the licence application and to make the evaluation. Consequently, 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 fulfil all the requirements and failure would be led to lapse of licence.

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What is payment banks?

Payment bank is a type of bank which is not involved in any type of credit risk. This type of banks provides credit to smaller units such as Low-income household, migrant labour workforce, small business units and unorganized sectors. It has no provision of issuing credit cards or advance loans to the customers. 

The services provided by the payments bank are as follows.

  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

The objective of payment banks

The main objectives of the payment banks are to provide financial inclusion to the following sections.

  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.

Importance of payment banks

Aid to the poor in India

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Alternative of traditional banks

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Guidelines for licencing of payment banks

Following are the guidelines for licencing of payment banks.

Scope of activities

Deployment of funds

Capital requirement



Tier capital



Tier I capital

7.5% of risk weighted assets


Tier II capital

100% of total Tier I capital


Foreign shareholding

Voting rights

Prudential norms

Promoters’ contribution

There is no provision laid down for limiting the shareholdings of promoters. But in case of the promoters of the payment bank are entitled to hold at least 40% of its paid-up equity capital for the first five years, which is from the commencement of its business. 

Business plan

  1. Business model
  2. The access points of the bank in rural and semi-urban areas
  3. Control policy of customer grievance redressal
  4. Joint venture partnership with a scheduled commercial bank

Corporate governance

Other conditions

Procedure for application

Procedure for RBI decision

  1. An applicant who fits in the given requirement
  2. Applicant having faultless record track
  3. Applicant providing organised and efficient customer service

 Small finance banks and payment banks



Small finance banks

Payment banks


Small finance banks are niche category banks that provide banking service of accepting and depositing of money for the section of people who are not eligible for.

Payment bank is a type of bank which is not involved in any type of credit risk. This type of banks provides credit to smaller units such as Low-income household, migrant labour workforce, small business units and unorganized sectors. It has no provision of issuing credit cards or advance loans to the customers. 

Scope of activities

  • Small finance banks accept the deposits and lend money to small business units, farmers with marginal earning, small business earning unit and unorganised sectors.
  • There are no restrictions provided in the field of operations of the small finance banks.
  • The payments bank can issue ATMs or Debit cards.
  • The payments bank can’t issue credit card
  • The payments bank provides channels for payments as well as remittance service through Automated Teller Machines (ATMs), Business Correspondents (BCs).
  • The payments bank provides internet banking service to the customers.

Facilities provided

  • Small finance banks can provide forex to their customers
  • Small finance banks have provision to sell mutual funds, insurance and pensions.
  • Small finance banks are not restricted to convert themselves into a full-fledged bank.
  • Payment banks provide internet banking service for customers.
  • Payment banks provide mobile banking services.
  • Payment banks provide forex at minimal charges as compared to other banks.
  • The customers can proceed their bill payments through payment banks.

Facilities excluded

  • Small finance banks can’t provide a large sum of loan to their customers.
  • Small finance banks do not have the provision to indicate the shares available to be sold or bought by general investing of public.
  • Small finance banks cannot deal with equity flow, number of folios, etc.
  • Payment banks do not have the right to provide credit cards to their customers.
  • Payment banks have the provision for extension of loans.
  • Payment banks accept the deposit of NRI.

Eligible promoters

  • Resident individuals or professionals having banking and finance experience of 10years
  • Non-banking Finance Companies (NBFCs)
  • Micro Finance Institution (MFIs)
  • Local Areas Banks (LABs)
  • Non-banking Finance Companies (NBFCs)
  • Corporate houses
  • Telecom companies
  • Business correspondents


  • Equitas Small Finance Bank
  • Utkarsh Small Finance Bank
  • ESAF Small Finance Bank
  • Capital Lab Small Finance Bank
  • Fincare Small Finance Bank
  • Suryoday Small Finance Bank
  • Janalakshmi Small Finance Bank
  • Ujjivan Small Finance Bank
  • A U Small Finance Bank
  • Aditya Birla Payments Bank
  • Airtel Payments Bank
  • Paytm Payments Bank
  • Fino Payments Bank
  • India Post Payments Bank
  • NSDL Payments Bank

Best payment banks in India

Best payment banks in India in 2019





Aditya Birla Payment Bank


Paytm Payment Bank


Airtel Payments Bank


India Payments Bank


Jio Payment Bank


NSDL Payments Bank


Vodafone m-Pesa Payments Bank


Fino Payment Bank

Payment bank list in India

There was an application of 41 organisations to get the approval for provisional payments bank but Reserve Bank of India approved only 11 out of the 41 applicants. The lists of the approved applicants are as follows.


Sl. no



Aditya Birla Nuvo Limited


Airtel M


Cholamandalam Distribution Services Limited


India Department of Posts


Fino PayTech Limited


National Securities Depository Limited


Reliance Industries Limited


Shri Dilip Shantilal Shanghvi


Paytm Payments Bank Limited


Tech Mahindra Limited


Vodafone m-Pesa Limited


List of active payment banks


Sl no.

List of active banks


Aditya Birla Payment Bank


Airtel Payment Bank


Indian Post Payment Bank


Fino Payment Bank


Jio Paytm Payment Bank


Paytm Payment Bank


NSDL Payment Bank

Latest payment banks in India

Out of 41 applicants, only 11 entities were given the licence for the payments bank in India. But out of the 11 entities, only 4 of them are functional till date and rest 7 payments bank are not functioning anymore.

List of those 4 payments bank functioning is as follows:

  1. Airtel Payments Bank
  2. India Post Payments Bank
  3. Fino Payments Bank
  4. Paytm Payments Bank

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