"The business model of the small finance banks is such that they are aimed to serve the small borrowers."Discuss differentiating them from Payment banks.

If we examine the business model of small finance banks and payment banks, we find that the Small Finance Banks model is for local players or niche players. For example, various banking activities such as to Accept Deposits, Issue Debit Cards, Remittance services etc. have been kept out of their purview and put in Payment Banks scope.  RBI has made it very clear that small finance banks are there to further financial inclusion by providing basic banking facilities to the unbanked and supply of credit to small business units of unorganized sectors. It is also evident from the condition that they need to extend 75% of their loans to priority sector lending and at least half of these loans should be below Rs. 25 Lakh.
Comparison of Payment Banks and Small Finance Banks
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Topics: GS-III: Indian Economy Issues Relating to Planning