The World Bank has said India’s move to set up 11 new payments banks is expected to expand penetration of the banking sector in vast rural areas of the country.  It has noted that the decision by the Reserve Bank of India to grant ‘in principle’ approval for 11 entities to set up payments banks, which would be directed at small savers in underserved (largely rural) markets, could help transform the rural remittances market. According to the World Bank, the entry of new players is likely to increase competition, lower remittance costs and extend the formal market for remittances.

The Reserve Bank has recently granted ‘in-principle’ approval to 11 entities, including Reliance Industries, Aditya Birla Nuvo, Vodafone and Airtel, to set up payments banks and proposed such licences ‘on tap’ in future.

Payment Banks

• The goal behind creating these payment banks is to bring about financial inclusion, by making it easier for anyone to get a bank account.
• Payment banks can accept deposits restricted to Rs. 1 lakh per customer, and are allowed to pay customers interest on the money that is being deposited.
• They can be used for either current accounts or savings accounts.
• While the payment banks can’t issue credit cards, they can issue ATM and debit cards.
• Payment banks can be integrated with your savings bank accounts via IMPS and NEFT transfers.
• The minimum paid-up equity capital for payments banks shall be Rs. 100 crore.