Difference between Payment Banks and Commercial Banks
Basis |
Payment Banks |
Commercial Banks |
---|---|---|
Scope of Activities |
Payment banks typically concentrate on offering basic financial services, such as receiving deposits and carrying out money transfers. They are prohibited from providing loans or issuing credit cards. Payment banks aim to facilitate financial inclusion by targeting individuals and communities that do not have access to traditional banking services or have limited access to them. |
Commercial banks provide diverse financial services such as deposit acceptance, loan provision, credit card issuance, and a variety of investment products. Payment banks have a narrower range of activities in comparison to them. |
Ownership and Regulation |
Payment banks are subject to regulation by the central bank or financial regulatory authorities of the country. Ownership of the entity might be either private or corporate. |
Commercial banks have diverse ownership arrangements, like private, public, or a hybrid composition. They are governed by extensive rules to preserve stability and safeguard the interests of customers. |
Interest Rates |
Payment banks typically provide interest on deposits, but at potentially lower rates compared to commercial banks. Their money is generated by collecting fees and charges on transactions. |
Commercial banks provide a variety of interest rates for deposits and loans, which vary based on the specific account or loan. They create revenue through the interest spread, which is the difference between the interest accrued on loans and the interest disbursed on deposits. |
Credit Card |
They are prohibited from issuing credit cards |
They can issue credit cards |
Primary Focus |
The main emphasis is on the transfer of funds and remittances. |
Remittances offering is not the main focus of Commercial banks |
Balance Limits |
The maximum balance limit is ₹1 lakh in savings account. |
There is no limits on deposit account balances. |
Payments banks will increase financial inclusion while also improving the country’s poorer sections, enabling them to take part in the country’s economic growth.
Payment Banks in India
Payments Bank was founded on the Nachiket Mor Committee’s suggestions to run on a smaller scale with little credit risk. The goal is to promote financial inclusion by providing banking and financial services to unbanked and underbanked areas, migrant workers, low-income households, small entrepreneurs, etc. They are registered under the Companies Act of 2013 but supervised by the Banking Regulation Act of 1949, RBI Act of 1934, Foreign Exchange Management Act of 1999, Payment and Settlement Systems Act of 2007, and others.
Table of Content
- Features of Payment Banks
- Payment Banks Regulations
- List of Payment Banks in India
- Activities That Can be Performed by Payment Banks
- Activities That Cannot be Performed by Payment Banks
- Difference between Payment Banks and Commercial Banks
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