UPSC Express

Differentiated Banks

• This system of banks is different from universal banks as they are mandated to serve niche interests and can offer limited products.
• Payment banks and small banks are part of differentiated banking.
• The purpose of these banks is to promote financial inclusion.
• Nachiket Mor committee in 2014 recommended the establishment of such institutions.

Payment Banks

• Objective of payments banks is to increase financial inclusion by providing small savings accounts, payment/remittance services to migrant labor, low income households, small businesses, other unorganized sector entities and other users.
• Those who can promote payments banks can be a commercial bank, non-bank PPIs (Prepaid payment issuer), Non Banking Financial Companies, mobile telephone companies, super market chains, real sector cooperatives companies and public sector entities.
• Payments Banks can accept demand deposits (only current account and savings accounts).
• No credit lending is allowed for Payments Banks.