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Payment Banks vs Small Finance Banks

Published on Tuesday, May 14, 2019
Payment banks can receive deposits and remittances, but cannot lend, focusing on migrant labour and low income households.
Payment Banks vs Small Finance Banks

Small banks (Complete listwill lend to “unserved and under-served sections”, including small business units, s mall and marginal farmers, and micro and small industries.

Payment Banks 
Small Finance Banks 
Provide small savings accounts and payments /remittance services to migrant labour workforce and low-income households Financial inclusion and supply of credit to small business units and farmers through high-technology and low-cost operations
Eligible Promoters
Individuals or professionals with necessary experience and eligibility, existing NBFCs, corporate banking correspondents, mobile companies, supermarket chains, real estate co-ops and corporate entities Resident individuals or professionals with 10 years of experience in banking and finance, companies and societies owned and controlled by residents, existing NBFCs, microfinance institutions and local area banks owned and controlled by residents
Scope of Activities
Accept deposits but customer balance should not exceed Rs.1 Lakh Basic services of accepting deposits and lending
Cannot give loans, can issue ATM/Debit card but no credit cards No restriction on the area of operations
Can distribute non-risk simple financial products such as mutual funds and insurance products At least 50% of its loan portfolio should constitute loans and advances of upto Rs.25 Lakh
NRIs will not be allowed to open accounts
Capital Requirement and Promoter’s contribution

Minimum paid-up equity capital of Rs.100 Crore/initially 40%, to be gradually brought down to 26% within 12 years from date of commencement
Must read: List of Payment banks with Headquarters and Taglines


On 19 August 2015, RBI approved "in-prinicple" licenses to 11 entities to start payment banks, these are 11 entities are :-
  • Aditya Birla Nuvo
  • Airtel M Commerce Services
  • Cholamandalam Distribution Services
  • Department of Posts
  • FINO PayTech
  • National Securities Depository
  • Reliance Industries
  • Dilip Shanghvi, founder of Sun Pharmaceuticals
  • Vijay Shekhar Sharma, CEO of Paytm
  • Tech Mahindra
  • Vodafone M-Pesa
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