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9 Ways In Which Payment Banks Are Different From Commercial Banks In India


The Reserve Bank of India (RBI) on Wednesday paved the way for payment banks in India, after giving an in principle approval to as many as 11 entities for the creation of payment banks.

These include the likes of Bharti Airtel, Tech Mahindra, Reliance Industries, Dilip Shanghavi, Vodafone etc.

9 Ways In Which Payment Banks Are Different From Commercial Banks In India
This follows an initiative in the Union Budget for expanding the banking reach. But, are the new payment banks a threat to the existing commercial banks in the country.

Here are 9 Must Know Points On The difference Between Commercial Banks and Payment Banks In India

1) Payment Banks Cannot Lend

While commercial banks in India can lend, payment banks cannot lend. This is one of the major differences between a payment bank and commercial bank in India.

2) Deposits up to Rs 1 lakh

Payment banks to start off cannot collect deposits in excess of Rs 1 lakh. What this means their scope maybe restricted more to semi-urban areas and rural areas. Commercial banks do not have any such restriction.

3) Payment Banks cannot issue credit cards

Payment banks are not allowed to issue credit cards. However, they are allowed to issue debit cards. Commercial banks can issue both.

4) Payment banks can act as business correspondents

These banks can align with other commercial banks in the country and act as business correspondents. This will allow both the entities to leverage on opportunities.

5) Minimum capital of Rs 100 crores

These banks should have a minimum capital of Rs 100 crores. The promoters have to contribute not less than 40 per cent to the capital. That would make the amount Rs 40 crores at the very least. Capital of commercial banks is way higher and their balance sheet size is enormous.

7) Foreign holding in these banks

The foreign holding in payment banks would follow the same policy as is currently prevalent for FDI in the banking sector at the moment. So, no difference here.


8) Customer grievance cell

All such payment banks must have a customer grievance cell that would entertain all requests and concerns of bank account holders. This is also available with commercial banks.

9) Distribution of financial products

These entities can engage in the distribution of financial products like mutual funds schemes, insurance etc. Commercial banks to can act as intermediaries to serve the needs of financial products of individuals.

The RBI has given an in principle approval for 11 companies, individual and entities to start banks. To check the list click here

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