Question 1

Which committee's recommendation led to the setting up of Payment Banks and Small Finance Banks in India?

Accepted Answer

Nachiket Mor Committee. The Nachiket Mor Committee recommended the creation of specialized banks to promote financial inclusion in 2013. These banks were designed to provide basic banking services to small businesses and low-income households. This initiated the era of differentiated banking in the Indian financial sector.

Question 2

What is the maximum limit for deposits per individual customer in a Payment Bank as of the current guidelines?

Accepted Answer

Rs. 2,00,000. The Reserve Bank of India increased the deposit limit for Payment Banks to Rs. 2 lakh in 2021. Previously, the limit was restricted to Rs. 1 lakh per individual. This change was aimed at incentivizing the growth of these banks and enhancing customer convenience.

Question 3

Which of the following activities is a Payment Bank NOT allowed to perform?

Accepted Answer

Issuing Credit cards. Payment Banks are prohibited from undertaking lending activities and therefore cannot issue credit cards. They can only issue debit cards and accept demand deposits like savings and current accounts. This restriction is meant to limit their credit risk exposure.

Question 4

What is the minimum paid-up equity capital required to set up a Small Finance Bank or a Payment Bank?

Accepted Answer

Rs. 100 crore. The initial minimum paid-up equity capital for both Payment and Small Finance Banks was fixed at Rs. 100 crore. However, for SFBs, this requirement has been raised to Rs. 200 crore for new licenses under the 'on-tap' window. Capital requirements ensure that these banks have a strong financial foundation.

Question 5

Small Finance Banks are required to extend what percentage of their Adjusted Net Bank Credit (ANBC) to the Priority Sector?

Accepted Answer

75%. Small Finance Banks have a higher Priority Sector Lending (PSL) target of 75% compared to 40% for universal commercial banks. This mandate ensures that the majority of their funds flow to agriculture and small industries. It aligns with their primary objective of providing credit to underserved segments.

Payment & Small Banks — Set 1