2.1.3.4. Payment Banks

In August 2015, the Reserve Bank of India (RBI) gave approval to private entities to open payments banks that will widen the reach of banking services and push the government’s goal of financial inclusion. Payments banks will accept deposits of up to Rs 1 lakh. They can issue ATM/debit cards but not credit cards. The promoter’s minimum initial contribution to equity capital will have to be at least 40% for the first five years.

It will provide a limited range of products – acceptance of demand deposits and remittances of funds, but will have a widespread network of access points particularly to remote areas. The network can be

♤ through bank branches or

♤ through business correspondents (BCs) or

♤ through networks provided by others

The payments banks will target financially excluded customers like migrant workers, low-income households and tiny businesses. They will not be in the business of lending, so they will be shielded from the risks that conventional banks are exposed to.