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Small finance bank and payments banks: In India, banks play a key role in ensuring smooth money flow and providing various services, such as loans, insurance, investments, and everything bank-related. In addition, the banks provide customers with a variety of banking services tailored to their particular requirements. RBI licenses some differentiated banks, such as Small finance and payment banks to provide various banking services in India. Please describe the primary distinction between these two types of banks. Small Finance and Payment Banks: Highlights
Small Finance and Payment banks are two major differentiated banks operating in India with a license approved by the Reserve Bank of India (RBI).
Small finance banks provide financial services and assistance to people with no bank connections or unregistered parts of the country. They only have permission to handle small banking operations along with deposit and credit. Payment banks generally offer banking services through mobile applications. However, they cannot offer loans.
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What are Small Finance Banks?
Small Finance banks are the banking services promoted by RBI to provide banking and financial services, especially to the unbanked and underbanked sections residing in India.
It basically includes small enterprises, farmers, low-income households, etc. They ensure that the financial needs of economically weaker sections are fulfilled with all access to formal banking services.
Small Finance and Payment Banks: Key Features of Small Finance Banks
Some of the major highlights of small finance banks are mentioned below.
Their primary focus is providing banking services to small and marginal enterprise farmers, low-income households, and other weaker sections of the society having limited access to basic banking services.
It provides a wide range of banking services, such as savings accounts, fixed deposits, and loan facilities.
Small Finance Banks also offer services such as mutual funds, insurance, pensions, and others to their customers.
They allot a portion of their lending to major sectors such as small-scale industries, agriculture, and others for the country’s overall development.
They provide high interest on deposits in savings and fixed deposits.
They also provide doorstep banking services in rural and urban areas. It provides various doorstep services such as deposits, account opening, withdrawals, and loan disbursements.
Minimum balance requirements in small finance banks are comparatively low as compared to other traditional banks.
What are Payment Banks?
Payment banks are differentiated banks offering a range of financial services and products. It can provide deposits up to INR 2 lakh. However, it does not provide any loans or credit card facilities. The Reserve Bank of India licenses them to operate in India and provide major banking services.
They cannot offer services such as credit cards or loans. However, they offer ATMs, mobile banking, net banking, and other major payment services to their clients.
Small Finance and Payment Banks: Key Features of Payment Banks
Some major highlights of Payment banks in India are mentioned below.
Payment banks provide zero-account balance options to their customers. Hence, they do not need to maintain any minimum balance in their bank account.
They also provide higher interest rates on the deposits.
The registered mobile number of a customer is typically their account number, which is simple to remember. It makes work easier, especially for traders, small businesses, and others. They do not offer credit cards and loans to their users.
They can also provide ATMs, debit cards, internet, and mobile banking.
They also provide many regular and occasional cashback and discount offers.
Candidates can make a deposit of up to 2 lakh INR. It provides facilities such as virtual debit cards for easier and smooth transactions.
They generally provide their services through mobile banking.
Small Finance and Payment Banks: List of Payment Banks
Some major payment banks operating in India are mentioned below.
Indian Post Payment Banks
Fino Paytech
National Securities Depository
Companies like Reliance Paytm
Vodafone M-Pesa
Tech Mahindra
Nuvo Aditya Birla Cholamandalam distribution services
Airtel M Commerce Services
Significant Differences Between Small Payment and Finance Banks Small finance and payments banks are types of differentiated banks slightly different from the other traditional banks. Some of the major differences are mentioned in the table below.
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