The IUP Journal of Bank Management
Payments Banks in India: An Analysis of Their Business Performance

Article Details
Pub. Date : Oct, 2021
Product Name : The IUP Journal of Bank Management
Product Type : Article
Product Code : IJBM21121
Author Name : V S Kaveri
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 7



In the context of promotion of financial inclusion in India, Payments Banks (PBs) have a key role to play as they accept small deposits from the poor and offer them low value remittance services. The unique feature of PBs is the size of remittances performed through technology platform being too large and value of each transaction being too small. Consequently, risk in remittance services is high and increasing. Therefore, Reserve Bank of India (RBI) imposed regulatory compliance norms on the part of PBs, which include minimum capital, Capital Adequacy Ratio (CAR), deployment of deposits in government securities, Cash Reserve Ratio (CRR) and best management practices. These are expected to ensure the financial soundness of PBs, strengthen safety in remittance services and protect the interests of small customers at large. Though the number of PBs is just six at present, considering the emerging business potential, a few more PBs are expected to come up. But from the study of financial analysis of PBs, it is observed that they face numerous issues which need to be addressed. Towards this end, the paper offers suggestions, besides discussing the origin, regulatory aspects, activity profile and performance review of PBs.


Financial inclusion means the delivery of financial services or accessibility and ease of the formal banking services at an affordable cost to the low income segment and to sections of disadvantaged group of the society.1 According to the Report of the Committee on Medium-Term Path on Financial Inclusion, Reserve Bank of India (RBI), 2015, 90% of small business establishments are outside the formal financial system. Hence, there is a dire need to promote financial inclusion in rural and unbanked areas. Fortunately, during the recent past, the mobile use is spreading very fast even in unbanked villages which would facilitate in achieving financial inclusion without much difficulty. In this regard, a few countries such as Kenya, Brazil and South Africa provide a good example for India to transform the payments systems with the use of mobile payment network.2 To increase financial inclusion further, a Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, headed by Nachiket Mor, was formed by RBI in 2013. This Committee recommended the formation of