Fintech Ecosystem in India and Impacts of Paytm on RBI's Move

In today's scenario the wallet users as well as digital channel payment users are having bundle of opportunity to avail services of various service providers and without hindrance they can enjoy the benefits of digital payments.

- Ranjit Kumar Ranjan

A payments bank is a unique model of banking conceptualized by the Reserve Bank of India. A payments bank is like any other bank but operating on a smaller scale without involving any credit risk. In simple words, it can carry out most banking operations but can't advance loans or issue credit cards. It can accept demand deposits in the form of saving and current account up to Rs 2 lakh. In no circumstances the payment bank can accept term/time deposit.

The payment bank offer remittance services, mobile payments/transfers/purchases and other banking services like ATM/debit cards, internet banking and third-party fund transfers. The payment banks are allowed to invest the money received from customers to government securities. Further the payment bank cannot open or set up subsidiaries to undertake NBFCs activities.

In September 2013, the Reserve Bank of India constituted a committee headed by Dr Nachiket Mor to study "Comprehensive financial services for small businesses and low-income household". The objective of the committee was to propose measures for achieving increased access to diversified financial services, expansion of rural banking and social & financial inclusion. The committee submitted its report to RBI in January 2014. One of the key suggestions of the committee was to introduce specialised banks or "Payments Bank" to cater to the lower income groups and small businesses.

Based on committee recommendations, RBI worked on that, and Airtel Payment bank became the first bank in the unique model of banking. Latter many other entities like India Post Payment Bank, Fino Payment Bank, Paytm Payment Bank and so on received such license.

Paytm Payment Bank

Paytm is an acronym of "Pay Through Mobile". Paytm was founded in August 2010 and Paytm Payment Bank came into existence on getting licence from RBI on 28th November 2017.