Prakhar Gupta has 4+ years of experience in Content Marketing Field. 

Content Marketing Specialist

Hi guys, let's know about the topic "Small Finance Banks and Payment Banks".

<h2 id="content-id-1939-0">Small Finance Banks and Payment Banks</h2>

Features of SFBs:

<ul>
	<li>Individuals/professions with 10 years of experience in finance, Non-Banking Financial Companies (NBFCs), microfinance companies, and local area banks are eligible to set up SFBs.</li>
	<li>The minimum paid-up equity capital for small finance banks shall be Rs. 100 crores.</li>
	<li>The promoter’s minimum initial contribution to the paid-up equity capital of such a small finance bank shall be at least 40 per cent and gradually brought down to 26 per cent within 12 years from the date of commencement of business of the bank.</li>
	<li>The foreign shareholding in the small finance bank would be as per the Foreign Direct Investment (FDI) policy for private sector banks as amended from time to time.</li>
	<li>The small finance banks will be required to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank.</li>
	<li>SFBs have to maintain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) as per RBI norms.</li>
	<li>At least 50 per cent of its loan portfolio should constitute loans and advances of up to Rs. 25 lakhs.</li>
	<li>They can offer small loans and both Fixed deposit and recurring deposit are accepted.</li>
	<li>No restriction in the area of operations.</li>
</ul>

Let’s move to another financial entity in the Banking sector that also aims to support the goal of financial inclusion in the society. These are the ‘Payment Banks’.

Features of Payment Banks:

<ul>
	<li>The minimum paid-up equity capital of the payments bank is Rs.100 crore.</li>
	<li>These do not accept time deposits like FD and RD. They cannot offer loans.</li>
	<li>The payments bank cannot set up subsidiaries to undertake non-banking financial services activities</li>
	<li>They can provide mobile banking services and issue ATM/ Debit cards. However, they cannot issue credit cards.</li>
	<li>Maintains minimum 75% of deposits in Government bonds and maximum 25% deposits with other scheduled commercial banks.</li>
	<li>The promoter’s minimum initial contribution to the paid-up equity capital of such payment banks shall be at least 40 per cent for the first five years from the commencement of its business. </li>
</ul>

<table cellspacing="0" class="Table" style="border-collapse:collapse; border:none; margin-left:17px">
	<tbody>
		<tr>
			<td>
			Basis
			</td>
			<td>
			Small Finance Banks
			</td>
			<td>
			Payment Banks
			</td>
		</tr>
		<tr>
			<td>
			Definition
			</td>
			<td>
			Provide funds to underprivileged
			</td>
			<td>
			It involves on smaller scale without involving any credit risk
			</td>
		</tr>
		<tr>
			<td>
			Minimum Paid up Capital
			</td>
			<td>
			₹300 Crores
			</td>
			<td>
			₹100 Crores
			</td>
		</tr>
		<tr>
			<td>
			Main Objective
			</td>
			<td>
			Provide total bank services to SMEs
			</td>
			<td>
			Financial Inclusion
			</td>
		</tr>
		<tr>
			<td>
			Amount accepted as deposit
			</td>
			<td>
			Accept all types of deposits, including FDs, RDs, CA and SA
			</td>
			<td>
			Accept demand deposits and hold up to ₹2 lakh
			</td>
		</tr>
		<tr>
			<td>
			Provide Credit
			</td>
			<td>
			75% of their credit to PSL. At least half of these loans should be below ₹25 lakh
			</td>
			<td>
			No one as they can’t provide loans
			</td>
		</tr>
		<tr>
			<td>
			First Bank
			</td>
			<td>
			Capital Small Finance Bank (2016)
			</td>
			<td>
			Airtel Payment Bank (2016)
			</td>
		</tr>
	</tbody>
</table>

Functional Small Finance Banks in India:

<ul>
	<li>Au Small Finance Bank Ltd.</li>
	<li>Capital Small Small Finance Bank Ltd.</li>
	<li>Fincare Small Finance Bank Ltd.</li>
	<li>Equitas Small Finance Bank Ltd.</li>
	<li>ESAF Small Finance Bank Ltd.</li>
	<li>Suryoday Small Finance Bank Ltd.</li>
	<li>Ujjivan Small Finance Bank Ltd.</li>
	<li>Utkarsh Small Finance Bank Ltd.</li>
	<li>North East Small Finance Bank Ltd.</li>
	<li>Jana Small Finance Bank Ltd.</li>
	<li>Shivalik Small Finance Bank Ltd.</li>
</ul>

Functional Payments Banks in India:

<ul>
	<li>Airtel Payments Bank Ltd.</li>
	<li>India Post Payments Bank Ltd.</li>
	<li>FINO Payments Bank Ltd.</li>
	<li>Paytm Payments Bank Ltd.</li>
</ul>

<h2 id="content-id-1939-1">Neo banks and their objectives</h2>

A neo bank is like a digital bank with its operations entirely being conducted online. They are a cheaper alternative to traditional banks. The Reserve Bank of India remains unwavering in prioritising banks’ physical presence, and has spoken about the need for digital banking service providers to have some physical presence. Neo banks are like a bridge between traditional banks services and the evolving expectations of customers in the digital age. They provide banking experience via digital applications.

Features of Neo Banks:

<ol>
	<li>They charge low fees.</li>
	<li>The banks use the technologies from the cloud.</li>
	<li>These are specialized financial systems like payments, expenditures, receivables and control of expenses.</li>
	<li>These banks are also focusing on forex cards, credit cards, cash processing, cost management and corporate banking services and loan products.</li>
	<li>The customer service of neo banks is based on artificial intelligence that provides automated online support.</li>
	<li>Neo Banks have been divided into licensed and non-licensed. Non licensed banks tie up with a traditional bank and provide their products while the licensed banks obtain their licenses and work on their own.</li>
	<li>Currently in India neo banks are not allowed to hold customer deposits and they are not even being granted virtual license by the RBI since it maintains the stand on the need of physical availability as per its 2014 guidelines.</li>
</ol>

Some of India’s renowned Neo Banks are: Razorpay, Jupiter, Niyo, Open, EpiFi.

There are 10 neo banks at present in India. ICICI took lead and partnered with three of them namely- Free, Instant Pay and Yelo.

We have read all the details regarding banks. Stay connected for more.

Since 1995, Neetu Mam is Providing Free Content for English to the Students

Best Publisher for English Content

Learn the&nbsp;key concepts&nbsp;of Small Finance Banks and Payment Banks

Study Notes for Banking Awareness  topic - Small Finance Banks and Payment Banks

Latest Notifications

Exam Eligibility

Exam Dates

Exam Pattern

Syllabus

Admit Card

Exam Cutoff

Answer Key

Exam Results

Daily Current Affairs

Current Affairs Quiz

Daily Editorial

Daily Vocabulary

Study Plan

Important Days

Question Paper

Previous Year PDF

English Language

Logical Reasoning

Quantitative Aptitude

General Knowledge

General Awareness

General Science

Today in History

Know Your State

Full Form

Know Your Country

Government Schemes

Know Your City

Know Your Leader

Books and Authors

question answer

Quiz

Courses

Classes

Study Notes for Computer Knowledge topic - Internet

Celebrating World NGO Day on 27th February

&lt;p&gt;No title&lt;/p&gt;

Click to study the Complete Theory of Small Finance Banks and Payment Banks and practice a lot of questions difficulty wise on this Static GK topic that can be asked in your competitive exam.

Study Notes for Banking Awareness topic - Small Finance Banks and Payment Banks

Small Finance Banks and Payment Banks FAQs

Small Finance Banks and Payment Banks Comments:

Small Finance Banks and Payment Banks RELATED ARTICLES