Economics • Banking & FinanceHard
Examine the structural composition and functions of 'Payments Banks' licensed by the Reserve Bank of India. Which of the following activities is legally permissible for a payments bank?
A. Issuing demand drafts, debit cards, and accepting current and savings account deposits up to a prescribed limit✓ Correct Answer
B. Extending term loans and revolving credit card facilities to retail and corporate borrowers
C. Issuing specialized agricultural credit cards and undertaking long-term rural mortgage lending
D. Underwriting foreign direct investments and dealing in complex derivative financial instruments
💡 Solution & Explanation
Payments banks are specialized financial institutions permitted to accept restricted deposits—currently up to two lakh rupees per customer—provide remittance services, issue debit cards, and offer internet banking. However, they are legally prohibited from lending money or issuing credit cards to mitigate credit risk exposure. They must invest a significant portion of their deposits in government securities. Promoting financial inclusion among migrant workers and unorganized sector employees is their core mandate.
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