hamburger

Difference Between Small Finance Bank and Payment Bank

By BYJU'S Exam Prep

Updated on: December 6th, 2023

The difference between Small Finance Bank and Payment Bank is that a small finance bank provides financial services to the unserved and unbanked areas, whereas a payment bank operates without involving any credit risk on a smaller scale. Despite numerous Difference Between Small Finance Bank and Payment Bank, it has to be noted that both these types of financial institutions have to abide by the rules and regulations laid down by the Reserve Bank of India.

Difference Between Small Finance Bank and Payment Bank PDF

The Reserve Bank of India licenses the Small Finance Bank and Payment Bank. The central bank of the country monitors the functioning and the guidelines of both these banks. As recorded in December 2021, there are 11 small finance banks in India, while the country has 6 payments banks as of December 2021. Let’s discuss the key differences between Small Finance Bank and Payment Bank in this article.

Difference Between Small Finance Bank and Payment Bank

Below, we have mentioned the Difference Between Small Finance Bank and Payment Bank based on parameters, objectives, scope, restrictions, etc. It will give a clear picture of the things that set apart Small Finance Bank Payment Bank.

Small Finance Bank vs Payment Bank

Difference Between Small Finance Bank and Payment Bank
Parameters Small Finance Banks in India Payments Banks
Definition The RBI has developed small Financial Banks to provide basic banking facilities to the country’s underserved and unprivileged areas. A Payments bank is akin to a regular bank but operates on a much smaller scale.

They are not allowed to provide any credit assistance to their customers

Objectives Set up to offer financial inclusions by providing credit facilities and personal loans to small businesses operating from underprivileged areas, marginal and small farmers, small and micro industries, and other businesses operating specifically in the unorganized sectors The primary objective of having a payments bank is the provision of financial inclusion by –

Provide small savings accounts

→Remittance of payments services to migrant labourers, low-income groups, small businesses, and other businesses operating in the unorganized sectors

Number of banks As recorded in December 2021, there are 11 small finance banks in India. As of 2022, there were 12 small finance banks in India. India has 6 payments banks as of December 2021. They are –

→Airtel Payments Bank Ltd

→India Post Payments Bank Ltd

→Fino Payments Bank Ltd

→Paytm Payments Bank Ltd

→Jio Payments Bank Ltd

→NSDL Payments Bank Limited

Minimum Capital Required The minimum equity capital paid for small finance banks is Rs 100 crores. The minimum equity capital paid up for the payments bank is Rs 100 crores
Scope Provide financial banking assistance only in the country’s marginalized and underserved areas Payment banks can provide financial assistance through ATM/debit cards and mobile banking.

Credit cards cannot be issued to them

Time Deposit The Small Finance Banks accept recurring and Fixed Deposits These banks do not accept time deposits
Loans They can offer small loans They are not eligible to offer any loan
Restrictions They are like normal banks operating in underprivileged areas

No financial restrictions are imposed on their functioning

They are not eligible to set up subsidiaries for undertaking services related to non-banking financial activities
First Launched India’s first small finance bank was Capital Small Finance Bank, launched in 2016. India’s first payment bank was Airtel Payments Bank, also launched in 2016.

Small Finance Bank and Payment Bank

Prepaid card issuers, retail chains, telecom firms, corporates, real estate sector co-ops, NBFCs, business correspondents and PSUs can promote Payment Banks.

  • Individuals with a minimum of 10 years of experience in NBFCs, finance, local area banks, and other small finance banks promote them.
  • Both Small Finance Banks and Payment Banks are niche banks.

Given are the definition and responsibilities of Small Finance Bank and Payment Bank in India.

What are Small Finance Banks in India?

Small finance banks can offer all types of deposits, such as savings, FDs, RDs, current accounts, and savings. Small Finance banks must ensure that the advances and loans do not exceed Rs. 25 Lakh and must constitute a minimum of 50% of their loan portfolio.

  • These bank mainly caters to small-scale industries.
  • In 2015, The Reserve Bank of India (RBI) ten entities were given temporary licenses, allowing them to transform into small finance banks within a year.

How Many Small Finance Bank in India 2023?

As of 2023, there are 12 small finance banks in India. These are:

  1. Au Small Finance Bank Ltd.
  2. Capital Small Finance Bank Ltd
  3. Disha Microfin Pvt Ltd
  4. Equitas Small Finance Bank Ltd
  5. ESAF Small Finance Bank Ltd.
  6. Fincare Small Finance Bank Ltd.
  7. Jana Small Finance Bank Ltd
  8. North East Small Finance Bank Ltd
  9. Shivalik Small Finance Bank Ltd
  10. Suryoday Small Finance Bank Ltd.
  11. Ujjivan Small Finance Bank Ltd.
  12. Utkarsh Small Finance Bank Ltd.

What is Payment Bank?

The payment banks can accept only demand deposits and hold up to Rs 1 lakh per individual. Insurance policies, mutual funds, and other financial products that come with low risk are allowed to be distributed by payment banks.

  • Payment bank provides remittance services for migratory labourers and unorganized sectors.
  • These banks operate on a smaller scale and are not permitted to issue credits.

Conclusion:

Key Difference Between Small Finance Bank and Payment Bank

The key Difference Between Small Finance Bank and Payment Bank is that a Small Finance bank is a financial institution operating under the rules laid down by the Reserve Bank of India and providing monetary services specifically to the underserved and unbanked territories of India. In contrast, a Payment bank is a relatively newer concept in India brought in by the Reserve Bank of India.

Related Articles
Janapadas and Mahajanapadas Alvars and Nayanars
Republican vs Democrat Difference Between Asian and African Elephant
Surcharge and Cess Difference Between Creamy and Non Creamy Layer
Difference Between Advancing Monsoon and Retreating Monsoon Difference Between Mythology and History
Our Apps Playstore
POPULAR EXAMS
SSC and Bank
Other Exams
GradeStack Learning Pvt. Ltd.Windsor IT Park, Tower - A, 2nd Floor, Sector 125, Noida, Uttar Pradesh 201303 help@byjusexamprep.com
Home Practice Test Series Premium