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.