Economics • Banking & FinanceMedium
What is the distinguishing feature of 'Payments Banks' operating in India compared to universal commercial banks?
A. They are permitted to issue credit cards and extend term loans to corporate borrowers.
B. They can accept demand deposits up to a specified limit per customer but cannot issue loans or credit cards.✓ Correct Answer
C. They are exempt from maintaining Cash Reserve Ratio and Statutory Liquidity Ratio with the RBI.
D. They are owned exclusively by foreign institutional investors and multilateral agencies.
💡 Solution & Explanation
Payments banks in India can accept demand deposits up to a prescribed limit per customer, currently set at two lakh rupees, and facilitate remittance services, but they are barred from granting loans or issuing credit cards. Commercial banks provide full credit facilities and term loans. Nachiket Mor committee recommendations served as the foundational basis for introducing payments banks into the Indian financial architecture.
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