Payments Bank

Everything you want to know about – Payments Bank

Until recently, you won’t be bothered about having a bank account or maintaining it. You must have known a Bank account simply as a Bank account…that’s all. But recently, you must have noticed this Public Notice from Paytm within all leading Newspapers. To cut the story short, though this notice, Paytm revealed their transformation from a e-wallet service into a Payments Bank.

Paytm Payments Bank

Payments Bank – What are those?

The moment you may have heard about the phrase “Payments bank”, I am sure your mind would have started scouting some reasonable answers.

  • What is a Payments Bank?
  • Is my current Bank not a payments bank as It pays me money whenever I ask it to?
  • And some more silly ones like … Would my present Bank stop paying me money and would rather ask the new Payment bank to do the same?

Let us understand this new model of banking

The new model of Payments bank has come from the RBI (Reserve Bank of India) which allows the Small financial services, Telecom companies  to function like Commercial Banks. This won’t necessary mean that they would be functioning entirely like a comprehensive Bank.

Payments Bank vs Commercial Banks

There are few key differences which separates Payments Bank from the Biggies (Private and Nationalized Banks) as below.

  • Payments Bank would not be able to accept deposit of more than INR 1 Lakh per customer.
  • These Banks cannot issue Loans and Credit cards to customers
  • They can however issue ATM or Debit Cards.
  • Ability to make last mile connectivity powered by their existing technological infrastructure.
  • These banks should pump in at-least capital worth Rs. 100 Crore; In case of commercial banks, the minimum capital is way up higher.

Which organizations are in?

On 19th August 2015, RBI gave “in-principle” licenses to 11 entities to launch their Payments Bank services. The highlight from this list was Indian post which would also run its own Payments Bank service .

  1. Aditya Birla Nuvo
  2. Airtel M Commerce Services
  3. Cholamandalam Distribution Services
  4. Department of Posts
  5. FINO PayTech
  6. National Securities Depository
  7. Reliance Industries
  8. Sun Pharmaceuticals
  9. Paytm (One Communications)
  10. Tech Mahindra
  11. Vodafone M-Pesa

My Views

With the emergency of Digital services that provide financial assistance to consumers, I believe that this is a steady step ahead. By empowering the telecom and other financial entities, the RBI has taken and bold yet promising step. Who knows, these Payments Bank might one day be able to situate themselves as a regular Commercial Banks providing full-fledged services (and Credit cards, which is my interest area :-)). But one thing which is very clear is that, this move would help the small scale industries and rural area which does not have ready connectivity with the Branches of Commercial banks.

Assume, if one is on Airtel’s network, he can simply use his mobile as his bank! Considering both Vodafone and Airtel would now be offering banking services, the frustration of  inter-bank transfers  would be a thing of past now. As you would be aware, person from rural region might not have a bank around, but by visiting a regional postal center, he can manage deposit his hard earned money conveniently in a Payments Bank operated by Department of Posts.

It is a great step forward and definitely a part of Digital revolution that country is noticing. Meanwhile, I just count few hundred (of coins) that I can put into my favorite Payments Bank.

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