The Small Finance Banks and the Payments Banks in India are both licensed under the Reserve Bank of India, and all its guidelines and functioning is monitored by the central bank of the country. Discussed further below are the differences between the two banks for the reference and understanding of all competitive exam aspirants.
Small finance banks are financial institutions that provide financial services to the country’s unserved, underserved and unbanked areas of the country. To know “What are the features of small finance banks?”, visit the linked article.
A payments bank operates on a smaller scale without involving any credit risk. It is a new model of banking in India, conceptualised by the central bank of India. To know about the history, background and regulations of Payments Bank, visit the linked article.
The difference between the two types of banks will widen the knowledge of government and IAS Exam aspirants about the basic banking industry in the country. Thus, candidates must carefully analyse the points of difference.
Small Finance Banks vs Payments Bank [UPSC Notes]:-Download PDF Here
Given below is a tabulated difference, comparing the aspects, guidelines and functions of the given two types of banks in India:
| Small Finance Banks | Payments Bank |
| Definition – Small Finance Banks are financial institutions that intend to fund the financial needs of the underprivileged sections through basic banking activities | Definition – A Payments Bank is like any other bank, but operating on a smaller scale without involving any credit risk. It can carry out most banking operations but can’t advance loans or issue credit cards. |
| Objectives: 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
| Objectives: The primary objective of setting up payments banks will be to further financial inclusion by providing: - small savings accounts
- payments/remittance services to migrant labour workforce, low-income households, small businesses, other unorganised sector entities
|
| How many Small Finance Banks are in India? As of December 2021, there are 11 Small Finance Banks in the country: - Au Small Finance Bank Ltd.
- Capital Small Finance Bank Ltd
- Fincare Small Finance Bank Ltd.
- Equitas Small Finance Bank Ltd
- ESAF Small Finance Bank Ltd.
- Suryoday Small Finance Bank Ltd.
- Ujjivan Small Finance Bank Ltd.
- Utkarsh Small Finance Bank Ltd.
- North East Small Finance Bank Ltd
- Jana Small Finance Bank Ltd
- Shivalik Small Finance Bank Ltd
| How many Payments banks are in India? As of December 2021, there are 6 Payments Bank in India: - 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
|
| Capital Requirement: The minimum paid-up equity capital for small finance banks is Rs.100 crore | Capital Requirement: The minimum paid-up equity capital of the payments bank is Rs.100 crore |
Scope of Activities:- Take up all primary banking activities only in the underserved section
| Scope of Activities:- ATM/Debit cards can be issued
- Credit cards cannot be issued
- Mobile banking available
|
| Time Deposit: Time Deposit such as Fixed Deposit (FD) and Recurring Deposit (RD) are both accepted | Time Deposit: These do not accept time deposits like FD and RD |
| They can offer small loans | They cannot offer loans |
| There is no restriction in the area of operations of small finance banks | The payments bank cannot set up subsidiaries to undertake non-banking financial services activities |
| Capital Small Finance Bank, launched in 2016 was India’s first Small Finance Bank | Airtel Payments Bank, introduced in 2016, became India’s first entity to receive a payments bank license from RBI |
There are a few similarities also between the two banks. One of which is that the foreign shareholding in these banks would be as per the Foreign Direct Investment (FDI) policy for private sector banks.
Apart from the Small Finance Banks and Payments Bank, there are various other categories of banks in India, candidates can learn about each one of them in detail at the Types of Banks in India page.
Also, all government exam aspirants can refer to 100+ Difference Between Articles, from different fields and subjects at the linked article. This shall prove to be helpful with the competitive exam preparation.
Other Related Links:
- History of Banking in India
- Functions of Bank
- List of Co-operative Banks in India
- What is the difference between a Bank and NBFC?
- Non-Banking Financial Institutions
Small Finance Banks vs Payments Bank [UPSC Notes]:-Download PDF Here
Banking, its related terms, and its types are an important topic from the perspective of government and civil service exam. Such questions can be included in the general awareness/current affairs part and can be easy scorers. Thus, candidates must focus on the details discussed above in this article.
For any further details, latest exam updates and study material, visit BYJU’S.
FAQs
Small banks can accept all types of deposits like a commercial bank ( savings, current, fixed deposits, recurring deposits etc) on the other hand Payment banks can take deposits only on current & savings account.
What is the difference between a payments bank and a small finance bank? ›
Differences between Small Finance Banks and Payments Banks
The Payment banks also can only accept demand deposits and the hold up to Rs. 2 lakh per person, whereas Small Finance Banks can accept all types of deposits, including FDs, RDs, Savings, and Current Accounts.
What is the difference between bank and small finance bank? ›
The difference between a small finance bank and a commercial bank is based on the customers they serve. Small finance banks have target customers who are small businessmen, farmers, etc. Whereas commercial banks do not have restrictions on the consumers, they benefit.
What is the difference between microfinance and small finance bank? ›
A small finance bank, as the name suggests, is essentially a bank, implying its ability to raise deposits. A Microfinance institution is generally a non-banking finance company, and is not allowed to raise deposits.
What is the difference between payment bank and universal bank? ›
Features of Payment Banks
They are differentiated and not universal banks. These operate on a smaller scale. It needs to have a minimum paid-up capital of Rs. 100,00,00,000.
What is the difference between bank and payment system? ›
In this case, the banks are the payment service providers and the customer is the beneficiary of the service. The payment system, on the other hand, refers to the special infrastructure used for interbank money transfers.
What is the difference between a bank account and a payments account? ›
A payment account is a bank account that allows you to make daily payment transactions. These transactions can include depositing funds, making cash withdrawals and card transactions. Accounts that don't allow you to make these types of transactions are known as non-payment accounts.
What are the major differences between large banks and small banks? ›
Small banks may offer a more personalized customer experience, while big banks may be more comprehensive, offering an array of deposit accounts, loans, insurance, financial planning and wealth management. When choosing a bank, and understanding how different banks operate, size is only one consideration, however.
What is the difference between a private bank and a small finance bank? ›
The fundamental difference between small finance banks and commercial banks is that small finance banks cater to only underprivileged sections of society to enhance financial inclusion. However, commercial banks cater to all sections of society and provide a larger amount of loans to their customers. Answer.
What is the difference between payments bank and commercial bank? ›
Some of the differences are: Deposit amount: You can deposit up to Rs 1 lakh in a payments bank, whereas there is no such limit in a commercial bank. Credit cards and loans: Payments banks are allowed to give debit cards to their customers but do not provide credit cards or loans.
Like a bank, a microfinance institution is a provider of credit. However, the size of the loans are smaller than those granted by traditional banks. These small loans are known as microcredit. The clients of an MFI are often microentrepreneurs in need of economic support to launch their business.
What are the advantages of Small Finance Banks? ›
High Interest Rates on Deposits
SFBs typically provide higher interest rates on savings accounts and fixed deposits compared to traditional banks. This can help you grow your savings more quickly and maximize your returns on investments.
What is the small finance bank? ›
Small Finance Banks basically work as savings vehicles as well, as they are engaged in offering credit facilities to small business units, micro and small industries, small and marginal farmers and other unorganised sectors through their advanced technology & low-cost operations.
What is the difference between small finance bank and Payments Bank? ›
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.
What are the rules for payment bank? ›
Regulations under Payment Bank
The minimum capital requirement is 100 crore. For the first five years, the stake of the promoter should remain at least 40%. The foreign shareholding will be allowed in these banks as per the rules for FDI in private banks in India.
What is the difference between a bank and a payment gateway? ›
A payment gateway is a network that collects, verifies and performs fraud checks on customer's credit card information before sending it to the payment processor. A payment processor is a service that routes a customer's credit card information between the customer's bank and the merchant bank.
What is meant by payment banks? ›
A Payments Bank is a bank that does not offer loans or credit cards. It takes deposits up to Rs 1 lakh from its customers. It provides various other financial services such as remittance transfer services, selling of financial products of other banks etc.
What is a small finance bank? ›
Small Finance Banks basically work as savings vehicles as well, as they are engaged in offering credit facilities to small business units, micro and small industries, small and marginal farmers and other unorganised sectors through their advanced technology & low-cost operations.
What is the difference between MFI and SFB? ›
MFIs provide small-ticket loans at an interest rate of 20-25 percent. SFBs lend at between 9 and 25 percent, depending on the type of loan.
Is it safe to keep money in small finance bank? ›
As the RBI regulates the segment, SFBs are as safe as any other type of bank.
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