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  3. Payments Bank Vs Commercial Bank

Payments Bank Vs Commercial Bank
By Anupama Deshpande | February 13, 2018

Recently launched, Payments Bank's category is absolutely different from that of commercial bank. Payments Bank is called Differentiated Bank whose concept first came in the year 2007. After working on this concept, RBI granted in-principle approvals to 11 entities for setting up payments banks (PBs) in August 2015. The main idea behind introduction of such banks by RBI is to target a specific market and customise these banks' operations on the basis of this target market's preferences.



Payments Bank offer limited range of products and services to their customers with an objective to provide financial inclusion to untapped and unserved sections of Indian population. Commercial Banks are already well established banks with their branch network across India.

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Payments Bank

  1. Customers are reached through Mobile banks
  2. One of the biggest challenges for payments bank is that it is not allowed to lend or offer loan
  3. Can't issue Credit Cards
  4. Needs to invest 75% of its deposits in government securities and 25% in other banks
  5. Must have 25% branches in rural areas
  6. Allowed to cross-sell services that are being offered on its platform
  7. Target customers are poor migrant labourers, unbanked Indians, under-banked customers, low-income households and small businesses
  8. Payments bank are allowed to provide only a limited range of banking products as allowed under the Banking Regulation Act of 1949

Commercial Bank

  1. Commercial Bank has no restrictions on providing any kind of products, functions and services to the customers
  2. Commercial banks in India can extend lending services such as home loans, personal loans, etc. without any restriction
  3. No cap on accepting deposits from its customers
  4. Can issue Debit as well as Credit Cards
  5. Commercial banks are allowed to invest the money they collect in form of deposits in open market
  6. Commercial banks can provide foreign exchange services however different banks charges are different for these services

Payments Bank Vs Commercial Bank

Find below major differences between Payments Bank and Commercial Bank

Basis of DifferencePayments BankCommercial Bank
Who can promoteCan be promoted by Telecom Companies, Prepaid Card Issuers, NBFCs, Supermarket Chains, PSUs, etc.As per guidelines issued by RBI
Promoter's Share40 % for first Five 5 years from the date of commencement of businessAs per guidelines issued by RBI
Capital RequiredMinimum Paid Up capital should be 100 CroresCommercial banks have enormous amounts of capital.
Regulatory RequirementsMeet CRR and SLR set by the RBIMeet CRR and SLR set by the RBI
Customer ReachCustomers are reached through Mobile banksCustomers are reached through its branches
Demand DepositCan accept demand deposit like savings deposit only upto Rs. 1 lakhCan accept deposit without any fixed limit
Time DepositCan't accept Time Deposit such as Fixed Deposit and Recurring DepositCan accept Time Deposit such as Fixed Deposit and Recurring Deposit
LoanCannot offer loanCan offer loan to its customers
Remittance ServicesCan provide Remittance ServicesCan provide Remittance Services
Online Banking SolutionsCan offer online banking services such as bill payment, etc.Can offer online banking services
RevenueEarns revenue through transaction charges and fee income for remittancesEarns revenue through leding services, transaction charges, etc.
Debit CardCan issue Debit Card and ATM Card Can issue Debit Card and ATM Card
Credit CardCan't issue credit cardsCan issue Credit Card
Target CustomersPoor migrant labourers, unbanked Indians, under-banked customers, low-income households and small businessesNot restricted to any region
Forex ServicesCan provide Forex Services and can charge less than commercial bank for these productsCan provide foreign exchange services, however, different banks charges are different for these services
Adoption of TechnologyShould be fully technology driven right from the beginningGradually implementing latest technology like online transactions, mobile banking, etc.
BranchesMust have 25% branches in rural areasCan open branches anywhere in India
Third Party ProductsCan sell third party products like mutual funds, indurance, pension products, etc.Can sell third party products like mutual funds, indurance, pension products, etc.

Interested to know Small Finance Bank Vs Payments Bank

Launch of More New Types of Differentiated Banks

The Reserve Bank of India has already issued licenses to 2 types of differentiated banks namely Payments Bank and Small Finance Banks. Now RBI is exploring the possibilities of licensing other types of differentiated banks as well like Custodian Banks and bank concentrating on Whole Sale and Long-Term financing.

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About Anupama Deshpande
Anupama is a Co-Founder of CodeForBanks.com. She is an MBA (Finance) and Chartered Financial Analyst (CFA). She also carries a Fellowship degree in Life Insurance Sector and is a Master of Computer Application (MCA). She is an expert in Finance Field with an experience of over 18 years on different managerial positions in finance industry including Stock Market, Depository and Mutual Fund Sectors. Apart from that she has remained for few years in the field of marketing as well. Her suggestions and advice for investments have been very useful to many people.
Her vast interest & expertise in the field of finance have encouraged her to write the articles so that others can also get benefitted out of them. She never loses any opportunity to learn and be creative. She is a valuable asset for CodeForBanks.com & important resource to all those around her.

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