A bank’s services is known to everybody: it accepts deposits from savers and grants loans to people and businesses. Opening a bank account can be tedious as going through the documentation process could take time. To reduce this time along with spreading and increasing the knowledge of financial services and digital payments, RBI initiated the concept of Payments Bank.
Payments Bank, a model conceptualized by RBI, is like any other bank but without offering any sort of credit. It can accept deposits and make payments but cannot advance loans or issue credit cards. A customer can make a maximum deposit of up to Rs 2 Lakh in these accounts. Mobile payments/transfers/purchases, as well as other banking services such as ATM/debit cards and net banking, are available through Payments Bank.
The goal of establishing a payments bank is to increase financial inclusion by offering modest savings accounts and payments/remittance services to migratory workers, low-income families, small enterprises, other unorganised sector firms, and other users. Since these accounts are Zero Balance accounts, there are widely used by students as well.
The RBI has granted banking authority to non-banking financial sectors for the first time in Indian history, and has already issued a second batch of specialised licences to small-scale banks. By offering a secure payment gateway for all transactions, this programme aims to reshape the Indian economy.
It also caters to migrant workers and low-income individuals by offering all services on mobile phones and charging a very minimal transaction cost for each service. This is the RBI’s second step to remove black money and promote cashless transactions in order to digitise India, following demonetization.
It eliminates the requirement to exchange bad currency notes and the cost of regenerating new notes because it is a cashless effort. This programme has already been implemented around the world and has been a huge success in Kenya. With these considerations in mind, payment banks are without a doubt the future of banking and will be a game-changer in the financial sector.
Finance graduate with a strong desire to understand the complexities of financial markets. I make financial judgments for my investments based on the information I gained during my academic education. I write articles about financial literacy for finnute.in in order to promote financial literacy among the general public.