Contemporary Banks (New Age Models) 🆕
To reach the unbanked population (Financial Inclusion), RBI introduced Differentiated Banks (Niche Banks) in 2015.
Unlike universal banks (SBI, HDFC) that do everything, these banks have a specific focus.
1. Payments Banks 📱
Objective: To provide small savings accounts and payments/remittance services to migrant labor, low-income households, and small businesses.
Key Features:
- Accept Deposits: Up to ₹2 Lakhs per customer (limit increased from ₹1L).
- NO Lending: Cannot give loans or issue credit cards.
- Investment: Must invest 75% of deposits in Government Securities (Safe!).
- Services: Debit cards, ATM, Internet banking, Bill payments.
Examples:
- Airtel Payments Bank (First in India).
- India Post Payments Bank (Uses post office network).
- Paytm Payments Bank (Currently facing RBI restrictions).
- Fino Payments Bank.
Why use them?
- High interest on savings (sometimes).
- Easy digital account opening.
- Great for transactions/wallets.
2. Small Finance Banks (SFBs) 🏘️
Objective: To provide credit to small business units, small and marginal farmers, micro and small industries.
Origin: Most SFBs were earlier Microfinance Institutions (MFIs).
Key Features:
- Accept Deposits: Yes (Savings, FD, RD) - No limit.
- Lending: Yes.
- Priority Sector Lending (PSL): Must lend 75% of loans to priority sector (Agriculture, MSME, Poor).
- Loan Size: 50% of loan portfolio must be loans up to ₹25 Lakhs.
Examples:
- AU Small Finance Bank.
- Equitas Small Finance Bank.
- Ujjivan Small Finance Bank.
- Jana Small Finance Bank.
Why use them?
- Higher Interest Rates: Often offer 7-8% on Savings/FD (to attract customers).
- Doorstep banking services.
3. Local Area Banks (LABs) 🗺️
- Old concept (1996).
- Operate in limited area (2-3 contiguous districts).
- Objective: Local savings for local credit.
- Status: Not very successful. Only 2 exist now (e.g., Coastal Local Area Bank).
Comparison: Payments Bank vs SFB vs Commercial Bank 🆚
| Feature | Payments Bank | Small Finance Bank | Commercial Bank (SBI/HDFC) |
|---|---|---|---|
| Accept Deposits | Yes (Max ₹2L) | Yes (No limit) | Yes (No limit) |
| Give Loans | NO | Yes (Focus on small) | Yes |
| Credit Cards | NO | Yes | Yes |
| Target Audience | Migrants, Low income | Small biz, Unbanked | Everyone |
| PSL Target | N/A | 75% | 40% |
Quiz Time! 🎯
Test Your Knowledge
Question 1 of 5
1. Payments Banks can accept deposits up to:
💡 Final Wisdom: "One size doesn't fit all. Payments Banks for transactions, SFBs for small loans, and Commercial Banks for everything else!" 🧩
Next up: Regional Rural Banks (RRBs) - Banking for Bharat! 🇮🇳