Payments Bank Flashcards
What is a payments bank?
(An answer by the committee set up by RBI:
The objective of the committee was to propose measures for achieving financial inclusion and increased access to financial services. )
A payments bank is like any other bank, but operating on a smaller scale without involving any credit risk. In simple words, it can carry out most banking operations but can’t advance loans or issue credit cards. It can accept demand deposits (up to Rs 1 lakh), offer remittance services ( Remittance Is a transfer of money by a foreign person to an individual in his or her home country )mobile payments/transfers/purchases and other banking services like ATM/debit cards, net banking and third party fund transfers.
Why payments banks?
*The main objective of payments bank is to widen the spread of payment and financial services to small business, low-income households, migrant labour workforce in secured technology-driven environment.
With payments banks, RBI seeks to increase the penetration level of financial services to the remote areas of the country.
What are they?
New stripped-down type of banks, which are expected to reach customers mainly through their mobile phones rather than traditional bank branches.
What they can and can’t do :
- They can’t offer loans but can raise deposits of upto Rs. 1 lakh, and pay interest on these balances just like a savings bank account does.
- They can offer services such as automatic payments of bills, and purchases in cashless, chequeless transactions through a phone.
- They can issue debit cards and ATM cards usable on ATM networks of all banks.
- They can transfer money directly to bank accounts at nearly no cost being a part of the gateway that connects banks.
- They can provide forex cards to travellers, usable again as a debit or ATM card all over India.
- They can offer forex services at charges lower than banks.
* Also, this is the first time since banks were nationalized, that private sector business groups have bagged the RBI’s nod for banking services. #*
What has the experience been in other countries?
Payment technologies have proved hugely popular in other developing countries. In Kenya, the most cited success story, Vodafone’s M-Pesa is used by two in three of adults to store money, make purchases and transfer funds to friends and relatives.
