Explanation – As per the recommendations of the Nachiket Mor Committee, Payments Banks were established to operate on a limited scale with minimal exposure to credit risk. Their primary goal is to promote financial inclusion by providing banking and financial services to underserved areas. Payments Banks are registered under the Companies Act 2013 but are subject to various regulations, including the Banking Regulation Act, 1949; RBI Act, 1934; Foreign Exchange Management Act, 1999; Payment and Settlement Systems Act, 2007, among others. Activities that can be performed/restricted by the Payment Banks: Payment banks receive a ‘differentiated’ bank license from the RBI and hence cannot lend. It cannot issue credit cards. It cannot issue loans. It cannot set up subsidiaries to undertake non-banking financial activities. Payment banks can take deposits up to Rs. 2,00,000. It can accept demand deposits in the form of savings and current accounts. It cannot accept time deposits or NRI deposits. The money received as deposits can be invested in secure government securities only in the form of Statutory Liquidity Ratio (SLR). It generates revenue through fees charged on transactions and services. It can offer remittance services, mobile payments/transfers/purchases, and other banking services like ATM/debit cards, net banking, and third-party fund transfers.

Source: Forum IAS