Economics • Banking & FinanceHard
What is the primary structural distinction between 'Payments Banks' and conventional scheduled commercial banks operating in India?
A. Payments banks can accept demand deposits up to specified limits and provide remittance services, but they are strictly prohibited from lending out loans or issuing credit cards.✓ Correct Answer
B. Payments banks operate exclusively in foreign currencies and are exempt from all reserve requirements mandated by the central bank.
C. Payments banks are owned entirely by multilateral financial institutions without any domestic private shareholding.
D. Payments banks function solely as non-banking financial corporations regulated under company law rather than banking statutes.
💡 Solution & Explanation
Payments banks can mobilize deposits and facilitate payments and remittances, but they cannot grant loans or issue credit cards, thereby minimizing credit risk. Alternative descriptions misstate foreign currency operations or ownership patterns. They must invest their deposit proceeds primarily in secure government securities.
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