March 1, 2024

HPAS/Allied Mains 2022 Answer Writing Challenge Day 191: Model Answer

QUESTION: Differentiate Between Payment Banks and Small Finance Banks. (4 marks/ 60 words)

Answer:  

Payments Bank

  • These have been set up to further financial inclusion by providing small savings accounts and payments/remittance services to migrant labour workforce, low-income households, small businesses, other unorganised sector entities.
  • These do not accept time deposits like Fixed Deposit (FD)and Recurring Deposit (RD).
  • They Cannot Issue Credit Cards.
  • They cannot offer loans.
  • The payments bank cannot set up subsidiaries to undertake non-banking. financial services activities.
  • E.g. Airtel Payments Bank Ltd., India Post Payments Bank Ltd.

Small Finance Banks

  • These have been set up to further financial inclusion by supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganised sector entities.
  • Time Deposit such as Fixed Deposit (FD) and Recurring Deposit (RD) are both accepted.
  • They Can Issue Credit Cards.
  • They can offer small loans.
  • There is no restriction in the area of operations of small finance banks.
  • E.g. Au Small Finance Bank Limited, Ujjivan Small Finance Bank Ltd.

 

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