Difference Between Payment Banks and Small Finance Banks

The following table gives a crisp overview of small finance banks and Payment banks.

Difference Small Bank Payments Bank
Eligibility Professionals with 10 years in financial services or promoter group with 5 year track record Card Issuers, Finance Companies, Business Correspondents, Telecom Companies, Retailers etc.
Capital Requirement Rs. 100 Crore Equity Capital Rs. 100 Crore Equity Capital
Scope of Activity Providing basic banking facilities to poor and small businessmen Accept Deposits, Issue Debit Cards, Remittance services. Can not issue credit cards
Promoter Contribution Promoter’s initial contribution should be 40% lowered to 26% in 12 years Promoters should retain a 40% stake for first five years.

While payment banks are to provide payment solutions, Small Finance Banks are to provide basic banking services for the purpose of financial inclusion and boosting saving habits among lowest strata of the society.

While Car issuers, finance companies, Business Correspondents, Telcos, retailers and Cooperatives are eligible to apply for Payment banks; professionals with 10 years experience in finance are eligible to apply for small finance banks.

The Capital requirement for both the types of banks is Rs. 100 Crore. However, In case of small finance banks, the Minimum initial contribution of the promoter to the paid-up capital is fixed at 40% and they can bring down his holding to 26% in 12 years from commencement. In Payment banks, the promoters should retain 40% stake for the first five years.

Last Updated: October 5, 2015

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