How Many Payments Banks Are Operating in India?
As of early 2024, there are six payments banks operating in India. These specialized banks, such as Airtel Payments Bank and India Post Payments Bank, are designed to advance financial inclusion by offering basic banking services to underserved populations.
How Many Payments Banks Are Active in India Today?
Have you seen names like Airtel Payments Bank or India Post Payments Bank and wondered what they are? You might be surprised to learn how many are currently operating. As of early 2024, there are six payments banks active in India. These institutions are a direct answer to a very important question: what is financial inclusion? They are specifically designed to bring millions of unbanked and underbanked citizens into the formal financial system, offering simple and accessible banking services.
What Exactly is a Payments Bank?
Think of a payments bank as a simplified, digital-first version of a traditional bank. The Reserve Bank of India (RBI) created this new category of banks to push financial services into the farthest corners of the country. They operate on a smaller scale and have certain restrictions that make them different from a bank like SBI or HDFC.
Their main goal is not to lend money but to make payments and deposits easy for everyone.
Key Features of a Payments Bank
- Accept Deposits: You can open a savings or a current account. However, there is a limit on the maximum balance you can hold. This limit is currently 200,000 rupees per customer.
- No Lending: This is the biggest difference. Payments banks cannot offer loans, credit cards, or overdraft facilities. This protects them from credit risk.
- Issue Cards: They can issue ATM and debit cards, which can be used at any ATM across the country.
- Handle Payments: They are experts at this. You can use them for mobile banking, utility bill payments, and money transfers (remittances).
- Sell Simple Financial Products: They can partner with other financial institutions to offer mutual funds and insurance products.
The Complete List of Active Payments Banks
While the RBI initially granted 'in-principle' approval to 11 applicants, only six have managed to build and sustain their operations. Here is the current list of payments banks operating in India.
| Payments Bank Name | Promoter / Parent Company | Launch Year |
|---|---|---|
| Airtel Payments Bank | Bharti Airtel | 2017 |
| India Post Payments Bank (IPPB) | Department of Post, Govt. of India | 2018 |
| Fino Payments Bank | Fino Paytech | 2017 |
| Paytm Payments Bank | One97 Communications & Vijay Shekhar Sharma | 2017 |
| NSDL Payments Bank | National Securities Depository Ltd (NSDL) | 2018 |
| Jio Payments Bank | Reliance Industries & SBI | 2018 |
Airtel Payments Bank was the first to launch. It leverages its massive mobile subscriber base to offer banking services directly through the phone.
India Post Payments Bank has a unique advantage: the unparalleled network of India's post offices. This allows it to reach deep into rural areas where traditional banks are absent.
Fino Payments Bank has a strong focus on a 'phygital' model, combining physical agent networks with digital technology to serve its customers.
Paytm Payments Bank built its services on top of its popular digital wallet, making it a familiar name for millions of users from day one.
NSDL Payments Bank comes from a background of capital market infrastructure, aiming to provide secure and straightforward banking solutions.
Jio Payments Bank is a joint venture between Reliance Industries and the State Bank of India, combining telecom reach with banking trust.
Why Were Payments Banks Created? A Big Step for Financial Inclusion
So, what is financial inclusion and why does it matter so much? Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services. This includes transactions, payments, savings, credit, and insurance. For a long time, a large part of India's population had no access to a bank account.
The RBI, based on recommendations from the Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households, chaired by Dr. Nachiket Mor, introduced the concept of payments banks. The primary objective was clear: to provide basic banking to migrant labourers, low-income households, small businesses, and people in rural India.
The idea was to use technology and existing distribution networks of telecom companies, post offices, and retail chains to offer banking services at a very low cost. This makes banking more accessible than ever before.
The Journey Hasn't Been Easy for Everyone
The road for payments banks has been a bit bumpy. Of the 11 entities that received initial approval, several dropped out before even starting. For example, Tech Mahindra and Cholamandalam Investment surrendered their licenses.
More significantly, Aditya Birla Payments Bank, which started operations in 2018, had to shut down just 18 months later. This highlighted the challenges in the business model.
What are the main challenges?
- Inability to Lend: The biggest hurdle is that payments banks cannot lend. Lending is the primary way traditional banks earn money (through interest). Without it, payments banks must rely on transaction fees and commissions, which are very low.
- Stiff Competition: The Unified Payments Interface (UPI) revolutionised digital payments in India. While good for consumers, it made it harder for payments banks to charge for money transfers, squeezing their income.
- High Costs: Setting up and running a banking operation, even a simplified one, is expensive. Customer acquisition and maintaining the technology and agent network require significant investment.
What is the Future for Payments Banks in India?
Despite the challenges, the six active payments banks have carved out an important space for themselves. They handle a massive volume of small-value transactions and have brought millions of people into the formal economy for the first time. They have become crucial last-mile service providers.
Their future depends on innovation and scale. By bundling services like bill payments, insurance, and simple investments, they can increase revenue per customer. Their extensive physical and digital networks are a major asset. The government often uses these networks to distribute direct benefit transfers (DBT) to citizens.
The RBI may also review the regulations in the future, possibly increasing the deposit limit further or allowing them to offer small, pre-approved credit products in partnership with other lenders. For now, they remain a vital part of India's financial landscape, quietly working to ensure no one is left behind.
Frequently Asked Questions
- What is the main difference between a payments bank and a regular bank?
- The main difference is that payments banks cannot lend money or issue credit cards. They can accept deposits only up to a limit of 200,000 rupees and focus primarily on payment and remittance services.
- Can I get a loan from a payments bank?
- No, you cannot get a loan directly from a payments bank. They are not permitted to engage in any lending activities, which includes offering personal loans, home loans, or credit cards.
- What is the maximum amount I can keep in a payments bank account?
- The maximum end-of-day balance you can maintain in a payments bank account is 200,000 rupees. This limit is set by the Reserve Bank of India.
- Which was the first payments bank to launch in India?
- Airtel Payments Bank was the first payments bank to launch its operations in India, starting in January 2017.
- Why did some payments banks shut down?
- Some payments banks shut down due to an unviable business model. The inability to lend, combined with intense competition from UPI and high operational costs, made it difficult for them to become profitable.