What is Payment Bank and how does it work

New Delhi: The Reserve Bank of India (RBI) on Wednesday granted ‘in principle’ approval to 11 applicants, including Reliance Industries Ltd., Aditya Birla Nuvo Ltd., Department of Posts and Cholamandalam Distribution Services Ltd., to set up payment banks.

The others who got the approval are Airtel M Commerce Services Limited, Fino PayTech Limited, National Securities Depository Limited, Dilip Shantilal Shanghvi, Vijay Shekhar Sharma, Tech Mahindra Limited and Vodafone m pesa Limited.

Payments bank licence will allow companies to collect deposits (initially up to Rs 1 lakh per individual), offer Internet banking, facilitate money transfers and sell insurance and mutual funds.

Also Read Payments banks important step; to expand rural banking: FM Jaitley

What is the objective of the payment bank?

The objectives of setting up of payments banks will be 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.

Do you get debit/credit cards for transaction?

No, you can’t get credit cards for transaction but the payment banks can issue ATM/debit cards.

Also Read Payments bank will bring millions unbanked into banking folds: Airtel

What will payment banks do for the banking system

Such banks will ensure more money comes into the banking system and will help reach out to people in rural areas. Moreover, the payments bank licence will enable the network of 1,54,000 post offices (including 1,30,000 rural post offices) to offer banking services to the masses in the country.

What about applying for loans through payment banks?

The RBI guidelines say that the payments bank cannot undertake lending activities. So if you want to apply for loan, you will have to go to the regular banks which issue loans.

Also Read Prasad wants Department of Post to become vehicle of financial inclusion

The RBI guidelines clearly say that the banks should have a high powered Customer Grievances Cell to handle customer complaints. The operations of the bank should be fully networked and technology driven from the beginning, conforming to generally accepted standards and norms.

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