FINANCIAL REGULATORS IN INDIA

There are mainly three Financial regulators in India:

1. Reserve Bank of India (RBI) - Banking Sector

2. Securities Exchange Board of India (SEBI) - Capital Markets /Mutual
Funds
3. Insurance Regulatory and Development Authority (IRDA)  - Insurance
Companies

STRUCTURE OF BANKING SYSTEM IN INDIA

Banks can generally be classified into various sub-categories as follows:

 PUBLIC SECTOR BANKS IN INDIA

o The State Bank Group and Nationalized banks: Is a group of 27
banks
o Has the largest number of branches in metro/ urban/rural areas
throughout the country
o Contributes to about 75% of the total deposits
o Contributes about 70% of total advances of all commercial banks in
India.
o Most have a very large branch network spread over all parts of the
country
o Have a Large deposits and assets base
o Perform all kinds of core and modern banking functions

 SCHEDULED BANKS:
o These are banks which are listed in the second schedule of
the Reserve Bank of India Act, 1934
o These banks are required to maintain certain amounts with RBI and,
in return, they enjoy the facility of financial accommodation and remittance
facilities at concessionary rates from RBI
o State Co-operative Banks
o Commercial Banks

The banking system plays an important role in promoting economic growth not

only by channeling savings into investments but also by improving allocative
efficiency of resources. The recent empirical evidence, in fact, suggests that
banking system contributes to economic growth more by improving the allocative
efficiency of resources than by channeling of resources from savers to investors.
An efficient banking system is now regarded as a necessary pre-condition for
growth.

The banking system of India consists of the central bank (Reserve Bank

of India - RBI), commercial banks, cooperative banks and development banks
(development finance institutions). These institutions, which provide a meeting
ground for the savers and the investors, form the core of India’s financial sector.
Through mobilization of resources and their better allocation, banks play an
important role in the development process of underdeveloped countries.

BANKING DEVELOPMENT AND

NATIONALIZATION OF BANKS IN INDIA
Banking development in India has been, by and large, a state-induced activity.
The Reserve Bank of India was nationalized in 1949 followed by the
nationalization of Imperial Bank of India (now the State Bank of India -
SBI) in 1955. In 1969, 14 major commercial banks were nationalized and the
exercise was repeated when 6 more commercial banks were nationalized in 1980.
Thus, prior to economic reforms initiated in early 1990s, banking business in
India was a near-monopoly of the Government of India.

The underlying philosophy of this approach was to encourage growth, via

availability of adequate credit at reasonable/concessional rates of interest, in
areas where commercial considerations did not allow for disbursal of credit.

THE FINANCIAL SECTOR IN INDIA

Along with the rest of the economy and perhaps even more than the rest,
financial markets in India have witnessed a fundamental transformation in the
years since liberalization. The going has not been smooth all along but the overall
effects have been largely positive.

Nationalization of commercial banks was a mixed blessing. After

nationalization there was a shift of emphasis from industry to agriculture. The
country witnessed rapid expansion in bank branches, even in rural areas.
However, bank nationalization created its own problems like
excessive bureaucratization, red-tapism and disruptive tactics of trade unions of
bank employees. It was in this backdrop that wide-ranging banking sector
reforms were introduced as an integral part of the economic reforms programme
started in early 1990s and which is still under way.

The Indian banking sector has witnessed wide ranging changes under the
influence of the financial sector reforms initiated during the early 1990s. The
approach to such reforms in India has been one of gradual and non-disruptive
 progress through a consultative process. The emphasis has been on deregulation
and opening up the banking sector to market forces. The Reserve Bank has been
consistently working towards the establishment of an enabling regulatory
framework with prompt and effective supervision as well as the development of
technological and institutional infrastructure.

Persistent efforts have been made towards adoption of international benchmarks

as appropriate to Indian conditions. While certain changes in the legal
infrastructure are yet to be effected, the developments so far have brought the
Indian financial system closer to global standards.

Private banks are today increasingly displacing nationalized banks from their
positions of pre-eminence. Though the nationalized State Bank of India
(SBI) remains the largest bank in the country by far, private banks like ICICI
Bank, Axis Bank and HDFC Bank have emerged as important players in the
retail banking sector. Though spawned by government-backed financial
institutions in each case, they are profit-driven professional enterprises.

Financial Sector in India consists of three main segments:

1. Financial institutions -banks, mutual funds, insurance companies

2. Financial markets -money market, debt market, capital market, forex
market
3. Financial products -loans, deposits, bonds, equities

https://www.lopol.org/article/banking-system-in-india 14/5/21 4.34 pm

https://www.paisabazaar.com/banking/ ( 14/5/21 4.38 pm)

Updated: 24-03-2021 05:44:05 AM

The banking industry handles finances in a country including cash and credit. Banks are the institutional bodies
that accept deposits and grant credit to the entities and play a major role in maintaining the economic stature of
a country. Given their importance in the economy, banks are kept under strict regulation in most of the
countries. In India, the Reserve Bank of India (RBI) is the apex banking institution that regulates the monetary
policy in the country.
Classification of Banks in India

Banks are classified into classified into four categories –

 Commercial Banks
 Small Finance Banks
 Payments Banks
 Co-operative Banks

Commercial Banks can be further classified into public sector banks, private sector banks, foreign banks and
Regional Rural Banks (RRB). On the other hand, cooperative banks are classified into urban and rural. Apart
from these, a fairly new addition to the structure is payments bank.
Commercial Banks

Commercial Banks are regulated under the Banking Regulation Act, 1949 and their business model is designed
to make profit. Their primary function is to accept deposits and grant loans to the general public, corporate and
government. Commercial banks can be divided into-

Public Sector Banks Private Sector Banks

Foreign Banks Regional Rural Banks

Public Sector Banks

These are the nationalised banks and account for more than 75 per cent of the total banking business in the
country. Majority of stakes in these banks are held by the government. In terms of volume, SBI is the largest
public sector bank in India and after its merger with its 5 associate banks (as on 1st April 2017) it has got a
position among the top 50 banks of the world.
There are a total of 12 nationalised banks in the country namely below:

Bank of Maharashtra Indian Bank

Bank of Baroda Punjab & Sind Bank

Bank of India Punjab National Bank

Canara Bank State Bank of India

Central Bank of India Union Bank of India

Indian Overseas Bank UCO Bank

Private Sector Banks

These include banks in which major stake or equity is held by private shareholders. All the banking rules and
regulations laid down by the RBI will be applicable on private sector banks as well. Given below is the list of
private-sector banks in India-

Axis Bank  IndusInd Bank

Bandhan Bank  Jammu and Kashmir Bank

City Union Bank  Karnataka Bank

Dhanlaxmi Bank  Kotak Mahindra Bank

 DCB Bank Karur Vysya Bank

Federal Bank Lakshmi Vilas Bank

HDFC Bank  Nainital Bank

ICICI Bank  RBL Bank

IDFC Bank  South Indian Bank

IDBI Bank  Tamilnad Mercantile Bank

YES Bank

Foreign Banks

A foreign bank is one that has its headquarters in a foreign country but operates in India as a private entity.
These banks are under the obligation to follow the regulations of its home country as well as the country in
which they are operating. Given below is the list of foreign banks operating in India –

List of Foreign Banks in India

Australia and New Zealand Banking Group

National Australia Bank Westpac Banking C
Ltd.

Bank of Bahrain & Kuwait BSC AB Bank Ltd. Sonali Bank

Bank of Nova Scotia Industrial & Commercial Bank of China Ltd. BNP Pariba
 Credit Agricole Corporate & Investment
Societe Generale Deutsche Ba
Bank

HSBC Bank PT Bank Maybank Indonesia TBK Mizuho Bank

Sumitomo Mitsui Banking Corporation MUFG Bank, Ltd. Cooperatieve Rabo

Doha Bank Q.P.S.C Qatar National Bank (Q.P.S.C.) JSC VTB Ba

Sberbank United Overseas Bank Ltd FirstRand Ban

Shinhan Bank Woori Bank KEB Hana B

Industrial Bank of Korea Bank of Ceylon Credit Suisse

CTBC Bank Co., Ltd. Krung Thai Bank Public Co. Ltd. Abu Dhabi Commerc

Mashreq Bank PSC First Abu Dhabi Bank PJSC Emirates Bank

Barclays Bank Plc. Standard Chartered Bank The Royal Bank of S

American Express Banking Corporation Bank of America Citibank

J.P. Morgan Chase Bank N.A Kookmin Bank SBM Bank (India)

DBS Bank India Limited

Regional Rural Banks

These are also scheduled commercial banks but they are established with the main objective of providing
credit to weaker sections of the society like agricultural labourers, marginal farmers and small enterprises.
 They usually operate at regional levels in different states of India and may have branches in selected urban
areas as well. Other important functions carried out by RRBs include-

 Providing banking and financial services to rural and semi-urban areas

 Government operations like disbursement of wages of MGNREGA workers, distribution of pensions,
etc.
 Para-Banking facilities like debit cards, credit cards and locker facilities

Small Finance Banks

This is a niche banking segment in the country and is aimed to provide financial inclusion to sections of the
society that are not served by other banks. The main customers of small finance banks include micro
industries, small and marginal farmers, unorganized sector entities and small business units. These are licensed
under Section 22 of the Banking Regulation Act, 1949 and are governed by the provisions of RBI Act, 1934
and FEMA.

Au Small Finance Bank Ltd. Jana Small Finance Bank Ltd.

Capital Small Finance Bank Ltd.

North East Small Finance Bank Ltd.

ESAF Small Finance Bank Ltd. Suryoday Small Finance Bank Ltd.

Equitas Small Finance Bank Ltd.

Utkarsh Small Finance Bank Ltd.

Fincare Small Finance Bank Ltd. Ujjivan Small Finance Bank Ltd.

Payments Bank
This is a relatively new model of bank in the Indian Banking industry. It was conceptualised by the RBI and is
allowed to accept a restricted deposit. The amount is currently limited to Rs. 1 Lakh per customer. They
also offer services like ATM cards, debit cards, net-banking and mobile-banking.

Co-operative Banks

Co-operative banks are registered under the Cooperative Societies Act, 1912 and they are run by an elected
managing committee. These work on no-profit no-loss basis and mainly serve entrepreneurs, small businesses,
industries and self-employment in urban areas. In rural areas, they mainly finance agriculture-based activities
like farming, livestock and hatcheries.

Urban Co-operative Banks State Co-operative Banks

Urban Co-operative Banks

Urban Co-operative Banks refer to the primary cooperative banks located in urban and semi-urban areas.
These banks essentially lent to small borrowers and businesses centered around communities, localities work
place groups.

According to the RBI, on 31st March, 2003 there were 2,104 Urban Co-operative Banks of which 56 were
scheduled banks. About 79% of these are located in five states, – Andhra Pradesh, Gujarat, Karnataka,
Maharashtra and Tamil Nadu.

State Co-operative Banks

A State Cooperative Bank is a federation of the central cooperative bank which acts as custodian of the
cooperative banking structure in the State.

Banks can also be classified on the basis of Scheduled and Non-Scheduled Banks. It is essential for every
individual to check if they are holding their savings or deposit account with a Scheduled Bank or Non-
Scheduled Bank. Scheduled Banks are also covered under the depositor insurance program of Deposit
Insurance and Credit Guarantee Corporation (DICGC), which is beneficial for all the account holders holding a
savings and fixed / recurring deposit account. Under DICGC, bank deposits of up to Rs 1 lakh, including
 the fixed, savings, current and recurring deposits, per depositor per bank in the event of bank failure are
insured.

Scheduled Banks

Scheduled banks are covered under the 2nd Schedule of the Reserve Bank of India Act, 1934. To qualify as a
scheduled bank, the bank should conform to the following conditions:

 A bank that has a paid-up capital of Rs. 5 Lakh and above qualifies for the schedule bank category
 A bank requires to satisfy the central bank that its affairs are not carried out in a way that causes
harm to the interest of the depositors
 A bank should be a corporation rather than a sole-proprietorship or partnership firm

Non-scheduled Banks

Non-scheduled banks refer to the local area banks which are not listed in the Second Schedule of Reserve
Bank of India. Non-Scheduled Banks are also required to maintain the cash reserve requirement, not with the
RBI, but with them.

https://www.drishtiias.com/to-the-points/paper3/payment-banks#:~:text=The%20objectives%20of
%20setting%20up,sector%20entities%20and%20other%20users.

14/5/21 4.49 pm

Payment Banks
 08 Jul 2020

What are Payment Banks?

 A payments bank (Airtel Payments Bank, India Post Payments Bank, etc.) is like any
other bank, but operating on a smaller or restricted scale.
 Credit risk is not involved with the Payments Bank. It can carry out most banking
operations but cannot advance loans or issue credit cards.
 It can accept demand deposits only i.e. savings and current accounts, not time
deposits.
 The Payment Banks cannot set up subsidiaries to undertake non-banking financial
services activities.
 A committee headed by Dr. Nachiket Mor recommended setting up of 'Payments Bank'
to cater to the lower income groups and small businesses.
 Benefits: Expansion of rural banking, access to diversified services, social & financial
inclusion are some of the benefits.
 Challenges: Lack of customer awareness, lack of incentives for agents, lack of
infrastructure, technological issues are some of the challenges.
Note:

 There are two kinds of banking licences that are granted by the Reserve Bank of India
- universal bank licence and differentiated bank licence.
 Payments bank comes under a differentiated bank licence since it cannot offer all the
services that a commercial bank offers. In particular, a payments bank cannot lend.
 It can take deposits upto ₹1 lakh per account and it can issue debit cards but not credit
cards.
 Commercial banks in India like State Bank of India or ICICI Bank, do not have any
such restrictions.

Objectives
 The objectives of setting up of a payments bank is to further financial inclusion by
providing small savings accounts and payments/remittance services to migrant labour
workforce, low income households, small businesses, other unorganised sector entities
and other users.

Scope of Activities
 Acceptance of demand deposits, initially restricted to holding a maximum balance of
Rs 100,000 per individual customer.
 Issuance of ATM/debit cards.
 They cannot issue credit cards.
 They are not allowed to give loans.
 Payments and remittance services through various channels.
 Distribution of non-risk sharing simple financial products like mutual fund units and
insurance products, etc.
 They are only allowed to invest the money received from customers' deposits into
government securities.
 They cannot accept NRI deposits.
 A payments bank account holder would be able to deposit and withdraw money
through any ATM or other service providers.
 Payments licensees would be granted to mobile firms, supermarket chains and others
to cater to individuals and small businesses.

Eligible Promoters
 Existing non-bank Pre-paid Payment Instrument (PPI) issuers;
 Other entities such as

o individuals/professionals;
o Non-Banking Finance Companies (NBFCs),
o Corporate Business Correspondents (BCs), mobile telephone companies,
o Supermarket chains, companies, real sector cooperatives; that are owned and
controlled by residents; and
o Public sector entities may apply to set up payments banks.
 A promoter/promoter group can have a joint venture with an existing scheduled
commercial bank to set up a payments bank.
 Scheduled commercial banks can take equity stake in a payments bank to the extent
permitted under the Banking Regulation Act, 1949.

Regulation
 The Payments Bank will be registered as a public limited company under the
Companies Act, 2013. It is governed by the provisions of the Banking Regulation Act,
1949; RBI Act, 1934; Foreign Exchange Management Act, 1999, Payment and Settlement
Systems Act, 2007, other relevant Statutes and Directives.
 They need to maintain a Cash Reserve Ratio (CRR).
 Required to invest a minimum 75% of its "demand deposit balances" in Statutory
Liquidity Ratio (SLR) eligible Government securities/treasury bills with maturity up to one
year.
 Need to hold maximum 25% in current and time/fixed deposits with other scheduled
commercial banks for operational purposes and liquidity management.

Other Important Provisions

 Capital requirement: The minimum paid-up capital for payments bank is Rs 100
crore.
 Promoter's contribution: Minimum initial contribution to the paid-up equity capital
shall at least be 40% for the first five years from the commencement of its business.
 Foreign shareholding: The foreign shareholding in the payments bank would be as
per the Foreign Direct Investment (FDI) policy for private sector banks as amended from
time to time.

Important Terms
 Promoter: A person involved in setting up and funding a new company.
 Credit Risk: Risk of loss or default which arises from the debtor being unlikely to repay
the loan amount.
 Paid-up Capital: Amount of money for which shares of the Company were issued to
the shareholders and payment was made by the shareholders.

https://www.askbankifsccode.com/blog/what-is-payments-

bank/#:~:text=The%20payments%20bank%20is%20not,from%20one

%20wallet%20to%20another.

14/5/21 5.02 pm
What is Payments Bank?
Payments bank is a new model of banking introduced by RBI in the year 2015.
At that time 11 entities applied for the license to operate a payments bank
including Paytm, Airtel etc. The concept of the payments bank is conceptualized
by the RBI in September 2014. A team of financial advisors led by  Nachiket
Mor was appointed by RBI. The committee submitted a final report in which
they recommended a new banking type and named it as payments banks.

The list of Banks RBI licensed in-principle to 11 entities-

 Aditya Birla Nuvo

 Airtel M Commerce Services
 Cholamandalam Distribution Services
 India Post Payments Bank
 Fino Paytech
 National Securities Depository LTD
 Reliance Industries
 Vodafone M-Pesa
 Paytm
 Tech Mahindra
 Sun Pharmaceuticals
Out of these banks, Airtel launched its payments bank in the year 2017 followed
by Indian post and Paytm. Cholamandalam Distribution Services, Sun
Pharmaceuticals, and Tech Mahindra have surrendered their licenses.
How do Payments Banks work?
The payments bank works with an online wallet that is digitally maintained. It is
connected to Aadhar and phone number of an individual. The online wallet
contains virtual money whose value is similar to Indian Rupees. The transaction
of the money can be made with one wallet to another or it can directly submit it
into the Bank account. This Payments Banks is just like a bank account but with
certain limitation. This limitation includes- no loans from Payments Banks, no
Credit Cards. The money transferred steps consist of the receiver’s id and the
amount to send and the payment of the money is done. It is very convenient
that makes it popular among the new generation. As the technology evolving
our way to transfer money is also evolving and Payments Bank is one such
example. This innovation in the financial sector helped millions of people during
the demonetization of the 500 and 2000 bank notes.

Advantages of Payments Bank

Payments Bank has a huge advantage over any other payment method as in
this payment method a customer can easily pay with just one click from his
mobile phone. This does not require any complex procedure which makes it
convenient for the users to pay.

Disadvantages of Payments Bank

The payments bank is not a traditional bank and it is its advantage as well as its
disadvantage. Disadvantage because we cannot opt for credit cards as well as a
loan from this bank. We only can pay and receive digital money so it is only
used for transferring money from one wallet to another.

List of best Payments Bank

Amazon pay
Everyone is aware of the tech giant Amazon they bring the best service when it
comes to delivering your favorite product at your doorstep. As recently Amazon
launched their Amazon pay wallet in India offering not only a wallet to transfer
money but also providing a lot of cash back offers along with their products. The
service record of the Amazon makes it top the list as it can capture market fast
by its amazing strategies.
Paytm
Paytm is best when it comes to Payments Bank as this is the only wallet that
behaves like a bank literally. It has a banking facility organized digitally and
offers a savings account with an interest rate of 4% per annum. It also
participates in NEFT system with Paytm IFSC Code.

Airtel money
In early 2017, Airtel launched the very first Payment Bank. Airtel money is
another popular payments bank which offers good wallet experience. Airtel
money app offers very attractive offers when it comes to recharging on Airtel
Sim Card.

Paypal
Paypal is the oldest player in this system of banking. It is very popular in USA,
UK etc. but entered India recently. Paypal works similar to any other payments
bank. There are millions of users in the world and is so far the most popular
way of money transaction online.

India Post Payments Bank

India Post Payments Bank (IPPB) is the most trusted payments bank as it is
operated by the Government of India under the Department of Posts, Ministry of
Communication. The IPPB utilizes its 155,015 post offices as access points and
300,000 postal service workers to provide house banking services which will
make people life easier. IPPB also participates in the NEFT system with IPPB
IFSC Code.

National Securities Depository Ltd.

National Securities Depository Ltd. (NSDL) is another government operated
payments bank. NSDL is historically known to provide service related to as a
Depository to hold securities of investors. NSDL participation in the Payments
Bank service is very interesting as it may offer very different service than any
other payment bank. It is also participating in the NEFT Fund transfer System
with the NSDL IFSC Code.
https://pscnotes.in/payment-banks-features-and-limitation-for-upsc/

14/5/21 5.07 pm

Payment Banks Features

and Limitation for UPSC
May 27, 2020 by Sheshan Pradhan

In the era of internet and smartphones, Payment Banks are becoming quite
popular these days.

Payment banks are helping people to send and deposit money in a very easy
way. Let’s look at the features, advantages and limitation of the Payment
Banks from UPSC point of view.

Suppose you paid a salary to your driver in cash because he doesn’t have a
bank account. He has to sends money to his family members who are residing
in a native place which is a small village through known people.

And off course, he is using a smartphone. The payment banks will look to
impact people like your driver as their first customer. With Payment banks
coming in it are a matter of time when your neighbourhood supermarket or
your phone network provider shop or even your phone can be doubled up as
banks.

It means a payment bank can be your neighbour’s shop and most of the
things will be done through your mobile phone.
Facilities provided by the Payment Banks

A Payment bank provides necessary facilities of a normal commercial bank. It

accepts your savings and allows you to send money directly through
smartphones. You will be able to make e-commerce purchases, buy pradhan
mantra schemes, do mobile recharges, bill payments, etc.

The objective of Payment Banks

The key objective of the payment banks is financial inclusion by offering small
saving accounts. It also provides payment remittance services to low-income
households, migrant labours and other unorganised sector entities.

These banks will also enable high volume low-value transactions in deposits
and payment remittance services in a technology-driven environment.

Payment banks also focus on paperless banking. So no cheques, no drafts,

no cash withdrawal slips or payslips.

Features of Payment Bank

To understand the concept of payment, banks better let us understand their
features first.

The first and most important feature of payment bank is the money you will
deposit is such banks will earn good interest. Airtel which has launched their
payment bank in Rajasthan has promised an interest rate of 7.25%. But there
is a limit of the deposit rupees 1 lakh.

Currently, a customer cannot deposit more than 1 lakh rupees in their bank
account. RBI has said in their statement that this limit may be increased in
future based on banks performance.

Payment banks can set up branches and ATMs. They can issue debit card
and offer internet banking. These banks can also sell third party product such
as mutual funds, insurance and pension products. And will surely be a
revenue stream for them.
In India, values of domestic remittance are of around eight thousand crores a
year. And 70% of them is less than rupees five thousand per month. Domestic
remittance means money sent by migrant workers to his or her native place.

So India can be a big market for payment banks and they can give complete
money transfer services and can also accept remittance to be sent to multiple
banks and receive remittances from them too.

Payment Banks can also undertake recharges and bill payments. They can
also sell Pradhan Mantri schemes such as Atal Pension Yojana, Jeevan
Suraksha and Jeevan Beema Yojanas.

Since these banks targets rural people and low-income households, RBI has
made sure that they are very secure. So RBI has required to invest 70% of
their deposit balances is GSec and treasury bills.

Limitations of Payment Banks.

RBI has put few restrictions on payment banks as well. Such as they cannot
give loans which means they cannot provide any lending services. They
cannot issue credit cards and accept NRI deposits. Finally, they cannot set up
subsidiaries for non-banking financial services as well.

Key Players of Payment Bank in

India
According to RBI guidelines for the payment banks, the service provider
banks must be fully networked and technology-driven from the time of its
commencement. 25% of its branches must be in an unbanked rural area.
They must use the term Payment Banks to differentiate it from another type of
banks.

So these guidelines clearly tell us that the expectation from a payment bank.
That is their main segment is the rural area, and they have to be technology-
driven. Forty-one applicants were in the race for payment bank licence out of
these 11 entities got the RBIs node for the in-principle licence.
Out of these 11, only 8 of them are in the race now. Rest 3 have surrender
due to profitability concerns coupled with the limited scope of business
activities.

Airtel was the first to launch the payment bank service.

Advantages of Payment Banks

After the governments push through the demonetisation of 500 and 1000
rupees notes, use of currency notes has decreased. Secondly, a payment
bank is a low-risk model for consumers. There are three main risks in the
banking industry, which are credit risk, market risk and operational risks.
Payment banks will not sanction any credit or loans to the public credit risk of
these banks is zero.

Most of the deposits have to invest in very safe treasury bills and government
securities, and hence the market risk is very minimal.

https://economictimes.indiatimes.com/wealth/save/5-things-to-know-before-you-use-a-payment-
bank/articleshow/58972964.cms

14/5/21 5.09pm

Plus and minus points of payment banks

Payment banks offer enhanced services compared to a digital wallet but are not in
the same league as the traditional banks.
The Reserve Bank of India has given out 11 payment bank licences. To make the most of these
banks, it is essential you know what they bring to the table.

Payment banks offer enhanced services compared to a digital wallet, but are not in the
same league as the traditional banks. Before you opt for their services, take a look at the
rate of interest being offered by them.
Like traditional banks, payment banks too offer interest on deposits in savings account and it can
significantly vary. Currently, Airtel payment bank offers 7.25%, India Post payment bank gives 5.5% and
Paytm payment bank offers 4% annual interest.

Convenience and reach

Inquire whether a payment bank offers ATM cards that can be used to withdraw money from other banks.
Currently, Airtel does not offer such ATM cards. “However, Airtel has over 10 lakh outlets across India
and these will become banking outlets allowing customers to deposit and withdraw money,” says Deepak
Kinger, VP, Banking and Financial Services, VirtusaPolaris.

However, if you need a debit card, India Post or Paytm may suit you better. “Frequent travellers should
also check whether a payment bank can provide forex cards that can be used as a debit or ATM card
outside India,” says Harshil Mathur, Co-founder and CEO of payment gateway firm Razorpay.

Bundled offers and discounts

Most of the payment banks have a non-NBFC heritage and will use payment bank as a customer retention
and acquisition mechanism. “For instance, Paytm will offer cashbacks and discounts on its e-commerce
portal if you pay for the shopping through the Paytm payment bank account. Airtel may give out a
discount on utility bill payments made through an Airtel payment bank account,” says Kinger.

So, you will need to choose the payment bank depending on what kind of bundled offers and services you
are most likely to avail of.

Charges on value added services

Just like interest rates, it is essential to be aware of the charges levied on the services offered by payment
banks. For instance, Airtel payment bank charges 0.65% if you withdraw cash and 0.5% of the transferred
amount if you transfer funds to another other bank.

“Customers need to watch out for fee escalations on value-added features and transaction charges which
can be substantial for higher ticket transactions,” says Kinger.

Not a substitute for traditional banks

Payment banks cannot lend or offer credit advance to customers like traditional banks. They can issue
cheque books and debit cards but not credit cards. Also, unlike traditional banks, you can keep a limited
sum in a payment bank account, currently capped at Rs 1 lakh per account.
“Payment banks are not a replacement for the established traditional banks. The later offers many more
services. Both traditional banks and digital banks have their own merits and cannot replace each other,”
says Mathur.

https://economictimes.indiatimes.com/topic/Payment-banks
14/5/21 5.22 pm
Articles on payment banks

https://www.livemint.com/industry/banking/payments-bank-deposit-limit-doubled-by-rbi-
11617772815778.html

14/5/21 5.40 pm

Payment banks deposit limit increased new rule by RBI

https://inc42.com/features/will-rbis-boost-for-payments-banks-break-the-monopoly-of-big-
banks/

14/5/21 5.46 pm article on PB

Airtel Payments Bank is an Indian payments bank with its headquarters in New Delhi. The
company is a subsidiary of Bharti Airtel.[2] On 11 April 2016, it became the first company to receive
the payments bank license from the Reserve Bank of India under Section 22 (1) of Banking
Regulation Act, 1949.[3] Airtel Payments Bank is a 80:20 partnership between Bharti Airtel and Kotak
Mahindra Bank.[4]

History[edit]
In 2015, eleven companies received In-principle approval from the Reserve Bank of India to set up
payments bank under the guidelines for Licensing of Payments Bank. Airtel was one of them, and it
launched Airtel Payments Bank in September 2016. Airtel's first payments bank went live with its
pilot project in Rajasthan in November 2016.[5]
The bank's capital at its establishment was ₹3,000 crore ($441 million). Airtel Payments Bank
reported deposits of ₹68.33 crore at the end of the financial year ended 31 March 2017, which was
its first year of operation.[6][7]

Services[edit]
Digital payments[edit]
In September 2017, Airtel Payments Bank launched UPI enabled digital payments to facilitate
secure digital payments. Customers need to link their bank accounts on BHIM before they can make
UPI payments. For UPI-based payments and transfers, customers are not required to furnish their
bank details to enable transactions.[8]
Airtel Money is a digital wallet by Airtel Payment Bank that allows users to make payments using
"My Airtel app" or USSD.[citation needed]

Insurance and pension[edit]

In July 2019, Airtel Payments Bank partnered with Bharti AXA General Insurance. [9][10] Airtel
Payments Bank and Bharti Axa Life Insurance have started to provide government's insurance
plan Pradhan Mantri Jeevan Jyoti Bima Yojana in August 2018.[11][12] In 2019, Airtel Payments Bank
started offering Atal Pension Yojana (a Government of India initiative) through its platform. [13]

Legal challenges[edit]
The Unique Identification Authority of India (UIDAI) suspended Bharti Airtel and Airtel Payment
Bank's licence for eKYC of Aadhar on 16 December 2017, following complaints from customers that
their accounts were being opened without their consent. Some even received their LPG subsidies in
their Airtel Payment Bank accounts.[14] However, on July 12, 2018, Airtel Payments Bank received
requisite approvals from the Reserved Bank of India and Unique Identification Authority of India
(UIDAI) to resume on-boarding new customers using of Aadhaar-based e-KYC. [15]

Financials[edit]
In 2018-19, Airtel Payments Bank reported a loss of ₹338 crore, [16] while it registered a loss of ₹272
crore in the financial year 2017-18.[17] In FY 20, its revenues rose 87% to ₹474 crore.[18]

Awards[edit]
 IAMAI 7th India Digital Awards for Money Transfer Programme 2017 [19]
 Asian Banker Risk Management Award 2018

References[edit]
1. ^ "Airtel Payments Bank ropes in Anubrata Biswas as its chief executive".
telecom.economictimes.indiatimes.com. Retrieved  25 May  2018.
2. ^ Jain, Upasana (23 November 2016).  "Airtel launches India's first payments bank".  livemint.com.
3. ^ "Airtel M-Commerce Services Ltd rechristened as Airtel Payments Bank Ltd Company unveils new
brand identity".  Bharti.com. Archived from  the original  on 2017-01-16. Retrieved  2017-01-13.
4. ^ "Airtel Payments Bank launched, with vow to shake up old banking system".  mint. 12 January 2017.
Retrieved  1 May  2021.
5. ^ "Airtel Payments Bank goes live with pilot project in Rajasthan".  Business Standard India. Press Trust
of India. 2016-11-24. Retrieved  2020-12-29.
6. ^ Pahwa, Nikhil (2017-07-04).  "Airtel Payments Bank reports deposits of Rs 690.33 crore at end of
FY17".  MediaNama. Retrieved  2017-07-10.
 7. ^ "Bharti Airtel to spend $441 million to set up payments bank".  Economictimes.indiatimes.com.
Retrieved  2017-01-13.
8. ^ "Airtel Payments Bank launches UPI enabled digital payments".  The Economic Times. 17 September
2017.
9. ^ "Airtel Payments Bank partners with Bharti AXA Life to offer term insurance".  The Economic Times. 2
July 2019.
10. ^ "Airtel Payments Bank partners with Bharti AXA Life to offer pure term insurance".  @businessline.
11. ^ Dua, Priyanka (16 August 2018).  "Airtel Payments Bank join hands with Bharti AXA Life Insurance to
offer Rs. 2 lakh insurance cover".  gizbot.com/.
12. ^ "Bharti AXA, Airtel Payments Bank team up to offer Pradhan Mantri Jeevan Jyoti Bima Yojana - ET
Telecom".  ETTelecom.com.
13. ^ "Airtel Payments Bank launches Aadhaar-enabled payment service: Report".  MediaNama. 2020-03-
02. Retrieved  2020-03-31.
14. ^ "UIDAI suspends Airtel, Airtel Payments Bank's eKYC licence".  The Indian Express. 16 December
2017. Retrieved  17 December  2017.
15. ^ Gupta, Komal (12 July 2018).  "Airtel Payments Bank gets RBI nod to resume enrolling
customers".  livemint.
16. ^ "Airtel Payment Bank loss widens to ₹339 crore in FY19, revenue jumps 59%" .  Business Today.
August 19, 2019.
17. ^ Merwin, Radhika (September 10, 2019).  "Why five out of the 11 payments banks have shut
shop".  The Hindu Business Line.
18. ^ "Airtel Payments Bank's revenue up 87% in FY20".  Livemint. June 28, 2020.
19. ^ "IMAI Digital Awards 2017". IAMAI.
20. ^ "The Asian Banker Risk Management Awards".  asianbankerawards.com.

https://en.wikipedia.org/wiki/Airtel_Payments_Bank#:~:text=In%202015%2C%20eleven%20companies
%20received,Payments%20Bank%20in%20September%202016.&text=The%20bank's%20capital%20at
%20its,3%2C000%20crore%20(%24441%20million).

14/5/21 11.13 pm

India’s first Payments Bank commences national operations

Will take digital banking services to the doorstep of every Indian, particularly in
unbanked rural areas, and contribute to the Government’s vision of Digital India and
Financial Inclusion

To develop nation-wide digital payments ecosystem with over five million merchants,
allowing customers to make secure and convenient cashless payments for goods and
services
  Airtel Payments Bank commits an initial investment of Rs 3000 crores to develop
a pan India banking network and digital payments ecosystem
 Will have a network of 250,000 banking points (Airtel retail stores) across 29
states from day one. This is more than the total number of ATMs in the country
 Will develop a nation-wide digital payments ecosystem with over five million
merchants; over one million merchants already onboarded
 Over one million customers added during the pilot phase
 Launches Airtel Payments Bank app and Online Card in collaboration with
MasterCard for convenient banking and cashless payments

New Delhi, January 12, 2017: Airtel Payments Bank, India’s first payments bank, today
commenced national operations with services now LIVE in all 29 States of India. 

Shri Arun Jaitley, Hon’ble Union Minster of Finance and Corporate Affairs formally
launched Airtel Payments Bank’s national operations today, marking a major milestone
in the history of India’s financial services sector. Also present on the occasion were
Sunil Bharti Mittal, Chairman, Bharti Enterprises; Uday Kotak, Executive Vice Chairman
& MD, Kotak Mahindra Bank; Gopal Vittal, MD & CEO (India & South Asia), Bharti
Airtel; and Shashi Arora, MD & CEO, Airtel Payments Bank.

Speaking on the occasion, Sunil Bharti Mittal said, “Bharti has always undertaken
transformational initiatives that have the potential to make a positive impact on the
society and contribute to the development of India. Airtel has been at the forefront of
India’s digital transformation and has empowered over 260 million customers with
affordable telecom services. With Airtel Payments Bank, we are starting another
important chapter in our journey, with the potential to truly transform lives and contribute
to financial inclusion in the country. Just like mobile telephony leapfrogged traditional
telecom networks to take affordable telecom services deep into the country, Airtel
Payments Bank aims to take digital banking services to the unbanked over their mobile
phones in a quick and efficient manner. Millions of Indians in rural areas will get their
first formal banking experience with Airtel Payments Bank.”

“We are fully committed to the Hon’ble Prime Minister Shri Narendra Modi’s call to build
a Digital India and lay a strong foundation for India’s transition to a cashless economy.
Airtel Payments Bank will invest towards building a vast digital payments ecosystem
with millions of merchants, and allow customers to make convenient cashless payments
for good and services with their mobile phones.”

Wide Network
Airtel Payments Bank, a fully digital and paperless bank, aims to take basic banking
services to the doorstep of every Indian by leveraging Airtel’s vast retail network.
Starting today, over 250,000 neighbourhood Airtel retail stores across the country will
also function as banking points, and customers will be able to open savings accounts,
deposit and withdraw cash across any of these banking points. 

No transaction charges for digital payments 

Airtel Payments Bank will not charge any processing fee from its customers and
merchants partners for digital transactions, thereby encouraging them to adopt cashless
payments.

Airtel Payments Bank App and online Debit Card

Airtel Payments Bank also rolled out its app for Android and iOS. The app can be
accessed through MyAirtel app. Customers simply need to install MyAirtel app on their
smartphone for a seamless access to Airtel Payments Bank services. In addition,
customers would also get access to a MasterCard powered online card, which can be
used to make payments across all online merchants accepting MasterCard.

Nationwide Digital Payments Ecosystem

Airtel Payments Bank will develop a nationwide merchant ecosystem of over five million
partners including small kirana stores, grocers, pharmacies, restaurants, etc. These
merchant partners will accept digital payments from Airtel Payments Bank customers
over mobile phones. Airtel Payments Bank has launched a Merchant App for digital
onboarding of partners. Anyone looking to become a merchant partner can download
this app from Google Playstore for free and start accepting digital payments
instantaneously.

Educating customers on digital payments; rewarding them for making it a habit

Airtel will leverage its vast base of over 260 million customers and educate them on the
benefits of digital payments, with special emphasis on customers with basic/feature
mobile phones to make them use their phones to make USSD based payments.

Annexure

Other important features of Airtel Payments Bank·

 Digital Banking: Quick and paperless account opening using Aadhaar based e-

KYC. This requires no documents at all, only the customer’s Aadhaar number is
needed.
 The customer’s mobile number will be his/her bank account number.
 Interest rate of 7.25 % p.a. on deposits in savings accounts.
 One minute of Airtel mobile talktime for every Rupee deposited at the time of
opening a savings account.
 Money transfer to any bank account in India (Free money transfer from Airtel-to-
Airtel numbers within Airtel Payments Bank). 
 Free Personal Accidental Insurance of Rs. 1 Lac with every Savings Account. 
 Easy deposit and withdrawal facility across a wide network of Airtel retail outlets.
 USSD and IVR in 12 languages for non-smartphone customers.

https://www.airtel.in/press-release/01-2017/union-finance-minister-shri-arun-jaitley-launches-airtel-
payments-bank 14/5/21 11.25 pm
 https://www.airtel.in/bank/about-us 11.32 14/5/21

As India’s first Payments Bank, we aim to give every Indian access to an equal,
effective, and trustworthy banking experience.

Airtel Payments Bank was launched in January 2017, by Bharti Airtel, India’s
largest telecom provider, to support the cashless revolution promised by the
Government of India.

Airtel Payments Bank is a differentiated bank that provides essential financial

services to its customers. In order to cater to the needs of the underserved and
unbanked population in the country, our products are built as a solution to the
problems posed by traditional banking – from long queues to endless
documentation to inconvenient travelling. We aim to make banking simpler, more
convenient, and more intuitive.

With Airtel Payments Bank, you can:

 Open a Savings Bank account at any of our 5 lakh+ banking points

 Get free personal accident insurance cover of Rs 1 Lac
 Earn 3.0% rate of interest
 Get an online debit card
 Deposit cash at any Banking Point in your vicinity
 Withdraw cash through our banking points or select bank ATMs
 Buy third party insurance products
 Transfer money to any bank account in India through IMPS or UPI
 Recharge prepaid mobiles/DTH and pay utility bills (electricity, water, gas,
postpaid, etc.)
 Book bus and train tickets
We also aim to make payments cashless and seamless, and that's precisely what
you can do with Airtel Money Wallet, the digital wallet of Airtel Payments Bank.
You can make online/offline digital payments, recharge your phone, pay utility
bills, and much more with Airtel Money Wallet. The wallet provides you with an
 option to make simple, secure and quick payments through your phone. With
Airtel Money Wallet, you can:

 Make digital payments at thousands of online and offline merchants through:

o QR Code Scanning
o Payment to a phone number
o BHIM UPI
o Merchant Initiated Payment
 You can also transfer money, recharge prepaid mobiles/DTH, pay
utility bills, book bus / train tickets and more.
As we mentioned, we aim to provide a seamless banking experience to every
Indian, including business owners (corporate, startups, SMEs). Our range of
business solutions include:

 Salary Management Solution

o Salary disbursal
o Reimbursement solutions
o Loan Management Solution
o Disbursement
o Collection
 Cash Management Solution
Join Airtel Payments Bank today and enjoy the ease of banking that you have
always wanted!
Banking
made easy and accessible

Secure Process

Supportive

Covenient Services

With telecom, we opened up communication lines across India to serve the unique
needs and wants for each of our customers.

With banking, we have taken that passion for serving people and emerged as an
easier, more intuitive and more accessible solution to problems that plague banking
in India.
10 Challenges That Could Make or Break India’s
Payments Banks: Their revolutionary potential is
no guarantee
In the year since it was launched, India’s national financial inclusion drive has generated plenty of
headlines – and even scored a Guinness World Record. But last week’s announcement from the
Reserve Bank of India (RBI) could prove to be one if its most consequential moves.

On Wednesday, the RBI announced that it has issued in-principal approval to 11 of the 42 applicants
that requested Payments Bank (PB) licenses. The government’s goal for these banks is that they
further financial inclusion by providing a limited slate of financial services to low-income households,
migrant laborers, small businesses and other underserved populations. To that end, PBs will be
allowed to:

 Accept demand deposits, with an initial limitation of USD $1,800 per individual customer.

 Issue ATM/debit cards – but not credit cards.

 Provide payments and remittance services through various channels.

 Serve as Business Correspondents of other banks.

 Distribute simple, non-risk sharing financial products like mutual fund units and insurance –
but not provide loans.

Assuming they’re able to comply with government requirements, these new PB entities – which
range from telecoms to the national Postal Department – will officially receive their licenses in 18
months.

RBI Governor Raghuram Rajan has said that PBs will “revolutionise banking” in India, without posing
a competitive threat to existing banks. And the decision to grant licenses to one in four applicants
represents a pretty unusual degree of latitude from the central bank. Further, the RBI has stated that
the entities that didn’t receive approval this time (along with many others) could be accepted in
future licensing rounds, as it intends to grant more licenses "virtually on tap." So the government
clearly views PBs as a powerful weapon in its financial inclusion arsenal.

But the impact of these banks is not guaranteed, and they will face the same hurdles as any financial
services provider that aims to serve the country’s low-income, rural communities. If it were simple to
serve these customers, India’s previous Business Correspondent efforts – not to mention its
experience with private services like M-PESA, which captures almost every payment in countries like
Kenya and Tanzania – would have met with more resounding success. Let’s take a look at 10
challenges PBs will face – and how they can live up to the government’s ambitious goals.

 
FINDING THE RIGHT LEADERSHIP

The Payments Bank concept is perhaps the first of its kind anywhere in the world – a hybrid of
banking and distribution with a running thread of technology. Thus far, business leaders from the
fast-moving consumer goods and technology sectors have led teams in the payments space in India.
But with payments now married to banking – a granular business of managing distribution points
prudentially – it will be critical to have the right set of skills steering PBs’ efforts. Without the right mix
of people, they may become a juggernaut hurtling towards failure.

DESIGNING THE RIGHT PRODUCTS

Remittances generate profits – indeed, India’s Business Correspondent initiative survived largely
because banks outsourced remittance services to them. But because of these competing services,
PBs will need to explore a “remittance plus” model, creating a differentiation between themselves
and existing Business Correspondents. This essentially means investing heavily in customer-centric
product design, thus capturing face-to-face and remote transactions by offering innovative products
delivered via mobile phone.

MOVING BEYOND CASH-IN/CASH-OUT

How well a PB is positioned with its network of cash-in/out points or low-cost and tech-heavy
branches will undoubtedly determine its initial footprint in the hinterlands. But cash-in/out alone will
not be enough, as these banks’ sustainability and scale will ultimately depend on customers’
adoption of digital cash for making transactions. Just cash-in/out services and no (or negligible)
transactions would result in inactive digital accounts, whereas PBs’ whole value proposition is based
on developing a revenue model around actual payment transactions. Critical drivers, therefore, lie in
PBs’ ability to leverage the e-commerce ecosystem in India, which is slated to cross the USD $16
billion mark by the end of 2015. PBs will also need to be proactive, helping to build out the digital
payment infrastructure through partnerships with online e-commerce and physical offline merchants
– especially in rural areas which mostly lack the required connectivity to take part in the expansion of
e-payments.

PULLING CUSTOMERS PAST THE 'CASH IS KING'

MENTALITY

The challenge of moving toward e-payments isn’t limited to infrastructure: For PBs to succeed, cash-
obsessed Indians will need to migrate to digital alternatives, which will require behavioural changes
above and beyond technological hurdles. Though a few e-wallet players and online marketplace
providers like Paytm, Foodpanda, Shopclues, etc., have been experimenting in this space in recent
years – albeit mainly in urban centres – for PBs, the task will be herculean. Ultimately, they will need
a concerted ecosystem effort and additional policy support to spur the growth of interlinkages and
missing markets.

SHIFTING INTERACTIONS TO ATMS AND MOBILE

According to the World Bank, just 39 percent of all account holders in India own a debit or ATM card,
and as mentioned, mobile banking has struggled to take off – especially in rural areas. Yet
compared to branch banking, ATM and especially mobile banking are far less expensive per
transaction, not to mention more convenient for customers. PBs have a great potential to change the
patterns of interactions between customers and banks by making banking transactions via ATMs
and mobile phones self-assisted, seamless, convenient and foolproof over the payments-based
architecture in India.

ENABLING PAYMENTS ECOSYSTEM PARTNERSHIPS

Effective partnerships will be crucial for running a digital payments system – particularly at cash-
in/out points and merchant/retail points. Facilitating these relationships is often the role of special
intermediary services providers like Pep Intermedius in Kenya and Uganda, which
manages float and distribution points for major supermarkets and players like AirTel, M-PESA and
KCB Mattani Bank, and Kopo-Kopo, which helps to manage the merchant ecosystem in Kenya. India
will need to put similar service providers in place to make PBs’ partnerships successful.

AVOIDING THE GOVERNMENT BUSINESS TRAP

Government business, in the form of government to person (G2P) payments, may seem like low-
hanging fruit to many PBs. But they should resist the temptation to make G2P services a core part of
their business case, or else they’ll run the risk of encountering the same sustainability challenges
that Business Correspondents have faced in the past in india. With government commissions for
G2P services subject to frequent and unpredictable decreases, depending on government business
could bring the sustainability of PBs into question.

WORKING WITH REGULATORS

PBs will have to comply with RBI regulations and prudential banking norms, maintaining prescribed
bank ratios like statutory liquidity, cash reserve and capital adequacy, and following rules involving
financial fraud, Anti Money Laundering & Combating Financial Terrorism (AML-CFT), etc. And the
need to comply with these regulations is one of the factors that many analysts blame for mobile
money’s struggles in India, which has required mobile money players like Vodafone and Airtel to
work through partner banks to offer payment services. With the important role PBs play in the
government’s financial inclusion drive, and the degree to which the RBI is clearly invested in their
success, hopefully it will ensure that these requirements won’t deccelerate PBs’ momentum.

EMBRACING RISK AND INNOVATION

PBs’ success in India will largely depend upon how well they are able to break the traditional
banking mentality and innovate. For instance, India’s banks – particularly those in the public sector –
have often heavily invested in government securities and bonds, as these instruments are perceived
to be safer than credit-market investments. But with Prime Minister Modi calling upon Indian
bankers to take a more proactive approach to banking, it’s clear that PBs must avoid this lazy and
risk-averse mindset and embrace new thinking and innovation. Even though they may not have the
option, right now, of offering credit products, PBs should embrace a forward-looking mindset in
exploring payments innovations – and even eventually offering credit services directly or in
partnerships.

LOCATING PATIENT CAPITAL

Even though they are allowed to raise deposits, this may not be sufficient for PBs to fund their
expansion. And with cutthroat competition, acquiring customers will be a substantial challenge – as
will maximizing revenue per customer. So the PB industry will need deep-pocketed, risk-taking
investors – and they must be in it for the long term. The mere fact that the RBI issued so many initial
licences clearly indicates that not all are expected to stay alive. So investors must be willing to
remain patient, at least for three years (or until they attain a net worth of USD $80 million), at which
point PBs will be allowed to have an IPO and get listed on the Indian Stock Exchange.

https://nextbillion.net/10-challenges-that-could-make-or-break-indias-experiment-
with-payments-banks/ 14/5/21 11.41 pm

Payments Banks And The Broken Business Model

Romita Majumdar

Inc42 Staff
24 Nov'20  18 min read
SHARE STORY

A restrictive business model drove enthusiastic stakeholders out even before the launch
of the payments banks

Existing stakeholders seem to be addressing different use cases instead of savings and
investments

An aggressive, revenue-focussed strategy may still save the day for payments banks

In January 2014, the Nachiket Mor Committee on ‘comprehensive financial services for
small businesses and low-income households’ floated the idea of creating a new
category of financial institutions called payment banks (PBs) in its recommendations.
The idea behind this new category was to take banking services to the country’s
hinterlands with the help of the private sector via a profitable model.

The initial euphoria around the new concept was stupendous. And it was visible in the
launch statement of Airtel, the country’s largest telecom player at the time.

“Just like mobile telephony leapfrogged traditional telecom networks to take affordable telecom
services deep into the country, Airtel Payments Bank aims to take digital banking services to the
unbanked over their mobile phones in a quick and efficient manner. Millions of Indians in rural
areas will get their first formal banking experience with Airtel Payments Bank,” said Sunil
Bharti Mittal, Chairman, Bharti Enterprises, during the formal launch of Airtel Payments Banks
in 2017.

Mittal’s vision was in line with other PB peers who believed that the new initiative would
give them access to millions of small-ticket financial customers, paving the way for
financial inclusivity and a larger payments economy. And there would be more leverage
when digital outreach reaches the grassroots and makes a massive dent in a cash-
loving rural economy. An M-Pesa dream of sorts within a banking format. Four years
down the road, the hype and the vision around PBs have taken a severe beating, and
the revenue crunch is choking them.

Too Many Stumbling Blocks

In August 2015, the Reserve Bank of India (RBI) gave in-principle approval to 11
applicants to set up their payments banks by February 2017. In November 2016, Airtel
launched the first payments bank of India even as the country was reeling under
demonetisation. It was followed by IndiaPost and Paytm payments banks in the next six
months.
But all was not well in the payments bank space. Out of the 11 applicants who sought
PB licences from the RBI, Cholamandalam Investment and Finance, Tech Mahindra
and a consortium, including IDFC Bank, Telenor Financial Services and billionaire Dilip
Shanghvi (in a personal capacity), dropped out by late 2016. Aditya Birla Idea Payments
Bank shut shop in September 2019, 20 months after commencing operations.

The PBs which have remained operational include Airtel, IndiaPost, Fino, Paytm, NSDL
(National Securities Depository Ltd.) and Reliance Jio. Of these, Paytm Payments Bank
has the highest revenue and financial performance metrics backed by substantial
funding in the Paytm ecosystem. Reliance Jio, another telecom major, entered the
space with a 70:30 partnership between Reliance Industries Ltd (RIL), the parent
company, and the State Bank of India.

The G-Sec Hurdle

A look at the investment structure and the revenue stream will further clarify what has
gone wrong with their viability. For starters, the minimum paid-up equity capital
requirement for each payments bank is  INR 100 Cr. They are required to maintain 75%
of their deposits in government securities, or G-Secs, for a year and only 25% of the
deposits could be parked with small commercial banks. But there is a cap on user
deposit here.

Each customer can only deposit a maximum of INR 100K in his/her PB account, which
means the total deposit would never reach the levels of a traditional bank and the
overall earning on the deposit would be much less. The mandatory G-Sec deposit for a
specific period does not help either, thanks to steadily dipping interest rates. The yield
on one-year G-Sec was 7-8% for the past three-four years, but in the past few months,
it has fallen below 5.5% and will further squeeze their earnings.

The payment banks’ customised service bouquets cannot rake in the moolah too. PBs
are allowed to offer remittance services as well as other day-to-day banking services,
including deposit charges as applicable, mobile payment, doorstep banking, bill
payments, fund transfer across the interbank payment network, withdrawal via
ATM/debit cards and shopping at merchant PoS. Additionally, they can deal in third-
party financial products such as insurance, carry out transactions for other banks who
deploy their business correspondents (BCs) and undertake non-risk activities such as
Aadhaar enrolment or become members of clearing houses. PBs charge up to 1%
commission on each transaction, but unless it is done on a massive scale, the revenue
stream will remain weak.

Why Lending Matters

What hinders payments banks most is the underlying no-lending business model – they
cannot lend money from their deposits, and hence, they have no scope to earn high
interest on a user’s borrowed capital. Credit as a product does not exist for PBs, placing
them at a great disadvantage against commercial banks. The idea is to protect them
against non-performing assets (NPAs), a major bane of the Indian banking ecosystem
in the current decade, but it has taken its toll on the revenue stream.

A weak revenue stream and consequential losses incurred by most of the PBs (more on
that later) are bound to hinder customer acquisition at scale. The PBs entered the
market with high-interest rates on deposits as their operational costs were estimated to
be low, given the low-cost infrastructural footprint and greater usage of technology. In
2017, Fino, Airtel, Paytm and IndiaPost were offering 4%, 7.25%, 4.5 and 5.5%,
respectively, which proved to be quite lucrative.

As of November 2020, the big four are offering 2.75%, 2.5%, 2.75%, and 2.75%,
respectively as they sought to safeguard their margins, even below what most banks
pay for low-value savings deposits. The slide in interest rates may easily lead to a
dwindling customer base and a major loss of business as ‘scale’ lies at the heart of
payments banks. They must grow their users and leverage low-value transactions to the
hilt in a bid to survive.

UPI Vs Payments Banks

Payments banks are also facing stiff competition from totally unexpected quarters. The
Indian payment ecosystem was quite different in 2017. India was still reeling under
demonetisation; the Unified Payments Interface was yet to catch the fancy of the
masses, and the wallets ruling the digital payment space were plagued by regulatory
headwinds. None of the PB aspirants was prepared for the sudden popularity and the
wide adoption of the UPI in the next couple of years. Its seamless interoperability,
stringent security and huge cashbacks from third-party payments apps on the platform
soon made UPI the star of digital transactions. And much like the wallets, the
transaction side of the payments banks has been hugely impacted by the third-party
UPI apps ecosystem.

Unlike payment banks, the UPI app (third party) has a simple interface that is not
subject to banking regulations. It is a single-tap solution that a user can directly initiate
without the need for KYC. In contrast, the PBs have targeted the unbanked millions,
especially in the non-urban areas, and aimed to monetise their vast user databases for
credit risk profiling, insurance sale and other purposes. The telecom and fintech
companies in play also wanted to leverage and grow their existing databases. But it is
unclear whether the PBs are exploring this possible usage of bank data or have a long-
term analytics strategy in place to boost their revenues.

“The payments bank model did not take off the way it was intended because they were subject to
regulations on risk and securities much like other banks, but no revenue model exists for them. In
a way, UPI was able to tap into that space because it was much more technology-driven,” Shilpa
Mankar Ahluwalia, who leads the fintech practice at law firm Shardul Amarchand Mangaldas &
Co told Inc42 in a recent interaction.
Interestingly, most of these fundamental constraints, especially the non-lending
parameter, were known to the stakeholders from the beginning. Experts, however, say
that most of the licensees wanted to come in for a different reason. Eventually, they
were planning to expand to mainstream (banking) roles and building the expertise and a
captive user base required for the same. For telcos, it was all about ensuring better
engagement with their subscriber base and providing complementary services.

“The PB model was an experiment that did not work, and the RBI has, in some ways,
accepted it by allowing PBs to apply for SFB licensing after five years of operations,”
says Tamal Bandyopadhyay, a veteran banking journalist and senior advisor to Jana
Small Finance Bank.

In fact, an internal report by the RBI working group last week has recommended that a
PB should be allowed to apply for a small finance bank (SFB) licence after three years
of operations instead of five years as mandated earlier this year. Unlike payment banks,
SFBs cater to small borrowers and can lend up to INR 25 lakh (subject to RBI norms).
The report also recommended that NBFCs with an asset size of INR 50,000 Cr and
above, including those which are owned by a corporate house, may be considered for
conversion into banks subject to completion of 10 years of operations. Is it one way of
resurrecting the fast-dwindling payments banks?

What Is Happening On The Ground?

Going by the latest policy twist by the RBI, things may not look up for the payments
banks anytime soon.  A deep dive into operational costs and earning trends would throw
light on what has been happening on the ground.

According to a December 2019 report by the central bank, in spite of an improvement in

net interest income and non-interest income, a rise in operating expenses resulted in
overall negative profits for PBs in FY2018-19. The limited operational space available to
them and the large initial costs involved in setting up the infrastructure would take them
longer to break even. However, they have managed to expand their customer base.

Understandably, PBs must invest to expand their reach across the payment landscape,
but their revenue structure is not in sync with it. According to RBI data for FY2018-19,
the ratio of operating expense to total income was around 1.24, showing high input cost,
even though the majority of the PB revenue comes from low-return SLR (statutory liquid
ratio) investments in G-Secs. SLR investment indicates the proportion of deposit a bank
has to keep in assets (gold and government bonds and securities) as specified by the
RBI.

As of FY2019-20, Fino, Airtel and Paytm PBs reported revenues of INR 689 Cr, INR
474 Cr and INR 2,100 Cr, respectively. As consolidated revenue and profit data for
payments banks are not available, the select financial ratios provided by the RBI
demonstrate the PBs’ return on investments in the first two years of operations.
Interestingly, Paytm PB reported a profit INR 29.8 Cr, up 55% year on year while Fino
PB said it had turned operationally profitable in FY20.

“PBs hoped to reach a scale that would help them earn from transaction charges. But that scale
has not been achieved yet even though the scope exists. They have been working aggressively on
cross-subsidisation solutions like insurance products, but they were disadvantaged right from the
conceptual stage,” says a fintech veteran who does not wish to be quoted.

Seema Prem, cofounder and CEO of FIA Technology Services, which deploys BCs for
different banking entities, notes that the limited products offered by PBs also limits the
revenue opportunities for the agents. “As traditional banks offer credit, they need
additional services for EMI, loan processing and recovery. All of these increase the
revenue potential for BCs working with those banks. While public-sector entities have a
social responsibility towards BCs operating in far-flung regions, private players in the
financial services space feel less inclined to ensure the same,” she says.

Business correspondents are bank representatives (either on direct payroll or via

agencies) who help account holders in unbanked regions open accounts and transact
for a stipulated fee commission.

Suhasini Verma, Associate Professor at the School of Business & Commerce, Manipal
University, sums up the situation well. “As of now, the payments banks have wafer-thin margins.
They have to keep a large part of their funds (75%) in G-Secs and the remaining with small
commercial banks. The majority of their revenue was supposed to come from remittances,
insurance and other financial services. But the competition is tough and it is difficult to earn a
significant chunk of revenue from those segments. So, even a government-owned entity like
India Post PB is struggling in spite of high transaction volumes,” she said.

Payments Banks Playing To Their Strengths

As Indian payments banks fail to find their revenue dreams, most of them are trying to
leverage their core strengths to reach the market. For instance, each operator in the
ecosystem is servicing different financial products. Some have enabled PoS
transactions or got into FasTAG partnerships or focussed on utility payments in rural
areas. But these are only a few scattered solutions and not well-orchestrated, long-term
strategies.

Take, for instance, IndiaPost PB (IPPB). Based on its massive presence in 650 districts
and among 3.5 crore customers, the IPPB has set up a full suite of banking services
and strong linkages with all interoperable payment and settlement systems. It is now
focussing on pan-India G2C (government-to-citizen) payments, especially rural DBT
(direct benefit transfer) disbursements under the Pradhan Mantri Garib Kalyan Yojana.
Unlike other payments banks, IPPB does not use PoS devices or issue debit cards. Its
local agents – postmen, postwomen or BCs, initiate transactions by taking a customer’s
biometrics and Aadhaar number which are stored in a QR card. Unlike debit cards
which need personal identification numbers (PINs) for payment initiation, QR cards use
the QR code to scan and pay. In spite of these benefits, the bureaucratic weight has
held IPPB back from utilising its full potential and taking digital payments to remote
regions, say industry experts.

In contrast, Fino PB has utilised its massive BC network to reach out to people. “We
cannot sell Mercedes to a customer who wants a Maruti,” says Rishi Gupta, managing
director and chief executive officer of Fino.

“The focus has been on distribution in a way that could compete with our telecom peers, and we
did it without any fanfare,” he says, explaining the BC-first approach that Fino has taken to
expand its market presence.

In Fino’s case, experts see a good model that utilises the existing BC network. But it
has not helped the company realise the ‘digital’ vision of the payments banks.

Gupta, however, thinks that the ability to enable microcredits will most certainly give it
an edge in the PB model. “With our deep BC penetration across the country, we are
poised to take care of recovery as well. We are not a small finance bank, but we want to
use our infrastructure to complete the portfolio of solutions with microcredit for our last-
mile customers if the RBI allows it,” he says.

Most fintech experts concur, saying both IndiaPost and Fino have demonstrated the
best use cases in the current PB ecosystem.

Both Fino PB and IPPB have enabled an Aadhaar-enabled payment system (AePS) for
maximum convenience. Airtel PB has also set up a cardless cash withdrawal system
called Instant Money Transfer (IMT), which can be used via its mobile app. Apart from
this recent e-PoS initiative, its AePS can be used to transact at micro-ATMs manned by
BCs. During the Q3 earnings call of Bharti Airtel, the company indicated new initiatives
for the PB business, which would be rolled out soon. With a network of more than 10
lakh retailers, Airtel PB has the most extensive merchant reach in the country.

Paytm, on the other hand, has several payment solutions in its portfolio. For the PB
business, the company has roped in a number of big-ticket partnerships, including tie-
ups with major auto manufacturers for FASTags under the National Electronic Toll
Collection programme. But a large number of products across its ecosystem often
dilutes Paytm’s PB performance.

“Today, only Paytm’s payments bank appears to be a success story with profits coming in, but
the company is doing so many other things to achieve this. In fact, the customer acquisition cost
is huge in this sector,” says Verma of Manipal University.
Will The Fault Lines Widen?
According to independent fintech consultants, each payments bank seems to be
targeting different areas and business/operational models. But these performance
metrics have not necessarily served the target PB customers (read the rural unbanked)
as expected. According to a report compiled by Dvara Research in September 2020
and based on the RBI data for FY2018-19, payments bank accounts are
overwhelmingly used for transactions instead of deposits.

The high volume and value of transactions compared to deposits clearly show that PB
account holders have been transacting more than depositing in these accounts, which
beats the fundamental principle of consumer banking – making it easier for people to
save and invest. Currently, RBI data on the number of accounts and deposit balances in
payments banks is not available.

“The PBs might not be able to viably reduce interest rates further as they operate on
tight margins due to the regulatory requirement (75% G-sec deposits). Therefore, the
PBs’ business model is not favourable to fulfilling the objective of providing small
savings accounts to the underserved.  However, given the high number of transactions
against the total deposit amounts held at PBs compared to that of SFBs or select SCBs,
it can be concluded that the users of PB accounts have employed them not as a store of
value but as a checking account for undertaking payment transactions with a formal
bank,” write Amulya Neelam and Anukriti Tiwari of Dvara Research.

The report also notes that transaction-focussed payments bank accounts can still exist
alongside deposit-focussed accounts of full-sized banks.

According to banking experts, PBs either need to align themselves with mainstream
banks or introduce customer-centric solutions (again to a non-smartphone using base) if
they want to build a sustainable future.

Vijay Mani, Partner at Deloitte India and head of digital payments, digital banking and
other digital services, notes that most payments banks sell multiple products — their
own payments products as well as other products like insurance from partners. But in
many of these product markets, the competitive landscape has changed since the
inception of PBs. They now face very focussed, aggressive and often deep-pocketed
competitors such as the UPI payment service providers or large merchant
acquirers/aggregators (say, Billdesk). The latter has been able to grab bigger market
shares than PBs in many of those market segments.

“Payment banks may need to re-examine their customer and merchant acquisition/retention
strategies and associated revenue models in the light of the changing competitive landscape.
Lending can be a useful element in this effort, but it should not be seen as a panacea; it has to go
hand in hand with customer focus,” says Mani.
 However, the central bank’s proposal for setting up a National Umbrella Entity (NUE),
which will work in parallel with the National Payments Corporation of India (NPCI) to
expand the digital payments ecosystem, could be a positive development for payments
banks. As it will be a for-profit entity (or entities, depending on the final structure), it is
an opportunity for PBs to seek out profitable use cases. Think of real-time cross-border
remittances, micropayments (beyond what the UPI is addressing), payments to a long
tail of billers and so on, says Mani. The headroom for growth is large enough to enable
payments banks to grow with others in the market if they clearly define their place in it.
For instance, various semi-urban/non-urban and some urban customer segments are
still underserved.

“We have more than 500 Mn smartphone users (and at least a couple hundred million more
addressable feature phone users), but maybe no more than 175 Mn users of mobile payments.
The next five years will see the market aggressively realising this growth potential. Therefore, it
is going to be a critical period for payments banks,” says Mani

https://inc42.com/features/india-payments-banks-broken-business-model/

14/5/21 12.00 am

https://www.drishtiias.com/to-the-points/paper3/india-post-payment-bank-ippb

14/5/21 4.56 pm

India Post Payment Bank (IPPB)

 14 Dec 2018
Why in News?
 The Prime Minister launched India Post Payments Bank (IPPB) on September 1, 2018.
 It is an initiative of the government aimed at making banking services available at
people’s doorstep.

What is IPPB?
 IPPB is a wholly-owned subsidiary of Deparment of Post, with
100 percent Government of India equity.
 It is a payments bank of the Indian postal department which will work through a
network of post offices and nearly 3 lakh postmen.
 IPPB’s Vision
1. Building most accessible, affordable and trusted bank for common man.
2. Spearheading Financial Inclusion- agenda for under-banked populace.
 It will be governed by Reserve Bank of India (RBI).
 While its services will be available to all citizens, the IPPB will primarily focus on
serving social sector beneficiaries, migrant labourers, un-organised sector, Micro Small
and Medium Enterprises (MSMEs), Panchayats, low-income households, in rural areas
and the unbanked and under-banked segments in both the rural and urban areas.
 IPPB will offer services through a mix of physical and digital platforms.
 Channels for delivering services will include:
1. Counter operations
2. ATMs/micro ATMs
3. Doorstep, mobile and internet banking
4. Pre-paid instruments such as mobile wallets, PoS, MPoS, etc.
 It will initially have 650 branches and 3,250 access points in post offices across the
country.
 All the 1.55 lakh post offices in the country are targeted to be linked to the IPPB system
by December 31, 2018.

Functions of IPPB
 It will accept deposits, offer remittance services, mobile banking and third-party
fund transfers.
 It offers 3 types of saving account:
 1. Regular Account – Safal,
2. Basic Savings Bank Deposit Account (BSBDA) – Sugam and
3. BSBDA Small – Saral
 The maximum limit on deposits for current and savings account is Rs 1 lakh.
 The bank offers a 4 per cent interest rate on savings account.
 They can issue debit cards and ATM cards, but they cannot issue credit cards and
cannot loan money.
 It will provide social security payments like MNREGA wages, direct benefit transfer and
give access to third-party services insurance, mutual funds.
 IPPB account holders will be issued a QR Code based biometric card with a unique
QR code.
What is Payment Bank? 

 Payments banks were part of the Reserve Bank of India’s strategy of

offering differentiated banking licences.
 A committee headed by Dr. Nachiket Mor recommended setting up of 'Payments
Bank' to cater to the lower income groups and small businesses.
 A payments bank is a differentiated bank, offering a limited range of products.
 It can accept demand deposits only that is savings and current accounts, not time
deposits.
 Payment banks are restricted to holding a maximum balance of Rs. 100,000(Rupees
one lakh only) per individual customer.
 Payment Banks cannot accept Non-Resident Indian (NRI) deposits.
 The Payment Banks cannot set up subsidiaries to undertake non-banking financial
services activities.

Potential of IPPB
 There are currently about 50,000 bank branches in rural India. Whereas the
Department of Post alone has almost 1,30,000 service points in rural India – which if
converted into points of banking service, can extend presence of banking services in rural
India by 3.5 times.
 It will allow leveraging the trust which the India Post enjoys in the minds of the public,
coupled with the simple, affordable and convenient digital solutions.
 A large number of the 3,00,000 employees of the postal services would also be
equipped with biometric and handheld devices to provide doorstep banking services.
 Due to failure of rural banking in past years due to mounting Non-Performing Assets
(NPAs), banks are over-burdened with the task of recovery of credit, rather than expansion
if banking services – possible through IPPB.
 Tapping of savings of the rural people through IPPB may help increase per capita
income of rural people through domestic savings.
 Money lenders in rural areas try to exploit people under financial aid, IPPB will help to
reduce such exploitation and provide effective financial services.

Benefits of IPPB
 Expansion of Rural Banking- IPPB will help reinvigorate the postal system, at the
same time expanding Rural Banking through its wide network of branches across India.
 Access to Diversified Services - Post Office savings Bank (POSB) accounts linked to
IPPB will allow lakhs of POSB accounts access to banking thereby enabling them to enjoy
internet banking, mobile banking, electronic fund transfers, online bill payments, digital
payments etc. across the spectrum of banks 24×7. Facilities such as third-party payment,
insurance and mutual funds etc will provide financial accessibility to diverse financial
services.
 Social & Financial Inclusion - IPPB can act as a catalyst for social and financial
inclusion through the vast network of post offices throughout the nation. Last mile delivery
of services through the postman - and ‘Grameen DakSewaks’ acting as Mobile bankers –
providing "banking at doorstep."
 Push to MSMEs - Rural MSMEs will benefit from financial services offered by IPPB.
 Effective DBT - IPPB will enable better penetration of schemes and better delivery of
benefits. Banking through IPPB would give a boost to Government’s initiatives like
promoting digital transactions and Direct Benefits Transfer (DBT).
 Employment - IPPB will generate employment opportunity for more than 3500 banking
professionals, who will be engaged in propagating financial literacy across the country.
 Credibility - It will also not have to gain the trust of customers like its competitors,
especially in the rural areas, as the local postman is still an integral part of the day-to-day
lives of the rural populace.

Challenges
 Low Awareness - Due to low financial and digital literacy among rural masses, they
might be discouraged to opt for formal financial services under IPPB.
 Strict Regulation - Given the severe restrictions imposed by the RBI on how it can
employ its funds, the odds seem to be stacked against the IPPB at the moment.
 User Charges - To generate revenues, it plans to charge fees on money transfers and
other financial services – which may act as a disincentive for rural customers.
 Competition - The IPPB is also likely to face stiff competition from private companies
already given Payment Bank licenses.
 Lack of Infrastructure - Lack of 24/7 electricity, internet services and infrastructure in
rural areas is another constraint.
 Human Resource - The staff needs extensive training in handling the
banking products - especially insurance and pension products - as they are different from
the current financial products in India Post’s portfolio. The real success will depend on the
implementation of technology and staff's adaptation to new technology.
 Technology - The post office payment bank will have to quickly move to an online
platform to make it easier for customers to access their accounts and conduct
transactions. With existing infrastructure and resources it is a challenge. 

Way Forward
 While the advantages enjoyed by IPPB are endeniable, it needs to cross over these
two hurdles — financial and pricing — to prevent itself from becoming another Air India.
 In order to make IPPB a game changer and to sustain in competition it requires
efficient infrastructure, autonomy in funds management, training and skilling of the postal
employees and promoting use of cashless transactions among rural masses.

https://www.bankindia.org/2018/12/best-payments-bank-in-india.html 15/5/21 12.13 am

8 Best Payments Bank in India

Payment Banks is a concept introduced by the Reserve Bank of India.

Reserve Bank of India approved 11 entities to establish Payment Banks. The
banks come under the regulation of the Apex Entity or the Head of the Central
Bank of India.

Payment banks are different from normal banks. The Payment Banks can
accept deposits up to Rs 1 Lakh. Such banks can’t issue credit cards, and the
NRIs can’t open an account with the Payment Banks.

The Payment Banks have a restriction to establish subsidiary units for

undertaking the non-banking financial services.

The Payment Banks cannot either avail loan or ledge loan to the customers.
These types of banks operate savingsas well as current accounts. The banks
also issue ATM/Debit cards, net-banking,and mobile-banking services.

Top 8 Payment Banks in India 

1. Aditya Birla Payments Bank

Aditya Birla Payments Bank is the adventure of Aditya Birla Group. The
Payment Bank established by Aditya Birla Multinational Company with Idea
Cellular Ltd in 2018, is the 4th Payments Bank.

This Payments Bank earlier operated as Idea Mobile Commerce Services Ltd
underIdea Cellular Ltd. 

2. Airtel Payments Bank

Airtel Payments Bank is a subsidiary of Bharti Airtel. Bharti Airtel is the first
Indian company to receive the license to set up Payments Bank.

Airtel Payments Bank is the first Live Payments Bank in the country that
initiated its services in 2016. The Airtel Payments Bank is a joint venture of
Bharti Airtel Ltd and Kotak Mahindra Bank Ltd.

3. India Post Payments Bank

The Department of Posts, Ministry of Communication operates India Post

Payments Bank, and the Government of India owns the bank.

The Government of India aims to provide a house to house banking services

utilizing the post offices across the country as access points.

India Post Payments Bank initiated its nationwide services in 2018.

4. FINO Payments Bank

FINO Payments Bank incorporated in 2017, but the company initiated its
financial services meeting the country’s banking needs in 2006.

FINO Payments Bank is the first bank in the category that went LIVE
nationwide with 410 branches and 25000 banking points.

The parent company FINO Paytech Limited owns and operates the Payments
bank and aims to serve with the exclusive business model.
5. NSDL Payments Bank

National Securities Depository Limited or NSDL is the first and largest

depository in India. NSDL obtained the license from Apex bank to set up
Payments Bank.

It aims to deliver unmatched digital banking services. NSDL commenced

Payments Bank operations in 2018.

6. Paytm Payments Bank

Paytm is an e-commerce payment system as well as a digital wallet company

operating in India.

One97 Communications is the parent company operating Paytm. Paytm

launched PaymentsBank operations in 2017.

7. Jio Payments Bank

Reliance Industries launched Jio Payments Bank and started its operations in
2018. Jio Payments Bank is a joint venture of Reliance Industries and State
Bank of India.

Jio Payments Bank is the sixth Payments Bank that commenced its
operations.

8. Vodafone M-Pesa Payments Bank

Vodafone M-Pesa is a mobile-based Payments Bank offering money transfer,

micro-financing, and finance services.

It is one of the successful mobile-phone based financial service providers.

Conclusion

RBI approved 11 entities in the initial phase, but companies like

Cholamandalam Distribution Services, TechMahindra, and Sun
Pharmaceuticals surrendered the licenses.

The concept of Payments Bank is a great initiative in the country. The

regulatory for the Payments Bank will change with time, and the operating
companies will give the best efforts to meet the growing needs of the
customers.