What are Payment Banks?

By Finance Advisory, 3rd Eye Advisory®
What are Payment Banks?

Payment Banks are banks that operate on a smaller scale than normal banks. These types of banks are operated through electronic means and do not have any physically established bank branches. All the transfers, purchases, remittances, and other transactions are carried out on an electronic device.

Here is all you need to know about Payment Banks:

  1. Types of Accounts:
    A person can open a current and a savings account in a Payment Bank. A Payment Bank does not accept Time Deposits.
  2. Restricted Deposit:
    As of now, in India, a person can only deposit up to Rs. 1,00,000 in its account in a Payment Bank.
  3. Loans:
    Payment Banks are NOT eligible to give loans.
  4. Interest:
    Payment Banks also pay interest on the amount deposited just like normal banks.
  5. Cards:
    Payment Banks cannot give out Credit Cards. However, they are eligible to issue Debit Cards and ATM Cards.
  6. Foreign exchange (Forex):
    Payment Banks can issue Forex cards that can be used anywhere in the country as a Debit or ATM card. They can also provide Forex services at lower rates than other banks.
  7. Remittance of money:
    No cost is involved while transferring money from one account to another.
  8. Connectivity:
    Payment banks will make banking services available in remote areas that are not serviced by bank branches currently.
  9. Minimum balance: No need of maintaining minimum balance in their account.
  10. Promoter's Contribution:
    Promoters will have to retain a 40% stake for first five years, which in case of small banks is 40% which can be lowered to 26% in 12 years
  11. Eligibility:
    Card Issuers, Finance Companies, Business Correspondents, Telecom Companies, Retailers, etc. are eligible for payment banks while in case of small banks the eligibility is 10 years in financial services or promoter group with 5 year track record.
  12. Source of revenue:
    Payment bank receives revenue through transaction charges while other banks will receive revenue from interest from loans as well.

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Article by: Finance Advisory, 3rd Eye Advisory®