UPSC Prelims 2016 Question:

The establishment of ‘Payment Banks’ is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context?

1. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks. 
2. Payment Banks can issue both credit cards and debit cards. 
3. Payment Banks cannot undertake lending activities.
   
   

Select the correct answer using the code given below:

Explanation:  

• Nachiket Mor Committee in 2014 recommended introduction of specialized banks or ‘payments banks’ to cater to the lower income groups and small businesses.

• With payments banks, the Reserve Bank of India (RBI) seeks to increase the penetration level of financial services to the remote areas of the country. Thus, mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks. So, statement 1 is correct.
  
  
• A payments bank is like any other bank, but operating on a smaller scale without involving any credit risk. In simple words, it can accept deposits, but can not issue credit cards. So, statement 2 is not correct.
  
  
• It can also carry out most banking operations but can’t advance loans. It can accept demand deposits (up to Rs 1 lakh), offer remittance services, mobile payments/transfers/purchases and other banking services like ATM/debit cards, net banking and third party fund transfers. So, statement 3 is correct.
  
  

Therefore, option (2) is the correct answer.

Relevance: In 2015, Reserve Bank of India granted 'in-principle' approval to 11 applicants to start payments banks.

Subject: Economics | Money and Banking