PAYMENT BANKS Syllabus GS Paper 3 – Economy)

Context: Recently, the Reserve Bank of India (RBI) imposed additional curbs on Paytm Payments Bank Ltd (PPBL), prohibiting it from operating its mobile wallet after February.

oIt has also been barred from taking further deposits or undertaking credit transactions or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, or National Common Mobility Cards, after February 29.

Payment Banks

• About: Payments banks function similarly to traditional banks but operate on a smaller or limited scale.
• Credit Risk Exclusion: Payments banks eliminate credit risk from their operations. Unlike conventional banks, they are not authorized to extend loans or issue credit cards.
• Focus: Payments Banks exclusively deal with demand deposits, specifically savings and current accounts. They do not entertain time deposits as part of their services.
• Objective: To advance financial inclusion by offering banking and financial services to the unbanked and underbanked areas, helping the migrant labour force, low-income
• Registerd under: Companies Act 2013.
• Governed by: Banking Regulation Act, 1949; RBI Act, 1934; Foreign Exchange Management Act, 1999, Payment and Settlement Systems Act, 2007.

FASTag

• About: FASTag is an electronic toll collection system in India, managed by the National Highway Authority of India (NHAI), utilizing Radio Frequency Identification (RFID) technology.
• Payment Mechanism: FASTag facilitates toll payments directly from the linked prepaid or savings account or directly from the toll owner, employing RFID technology.
• Dedicated Lanes: Dedicated lanes for FASTag users have been established at select toll plazas, streamlining the toll collection process.