The Indian economic structure has been completely transformed by demonetization. Nowadays, individuals prefer using digital payment platforms and rely more on paperless transactions. It has given E-wallets or mobile wallets, which were previously unpopular, an abrupt boost. Payment banks are these internet gateways’ main market. One must obtain a Payment Bank License in India to launch any payment gateway there.

The Reserve Bank of India (RBI) conceptualized a new bank type in 2014 known as “payments banks.” These banks are permitted to accept restricted deposits up to a $100,000 per customer cap, which will eventually increase.

A recent addition to the banking industry, utilize the loan and credit card issuance facilities. Debit cards, ATM cards, mobile banking, net banking, and other services are provided by payment banks. A bank can also run both current and savings accounts by obtaining a Payment Bank License.

Payment Bank License



  • Deposits up to 1 lakh are available: Deposits can only be made to payments banks up to a maximum of Rs. 1 lakh. Customers are required to adhere to the established limit, which cannot be exceeded at any moment. One may decide to deposit a sum in full or in part. The RBI imposed that ceiling to safeguard customers’ interests and consider how young these banks are.
  • Online Debit Card Service: The fact that the payments bank provides both real and virtual debit cards is another uncommon feature. Debit cards give consumers the advantage of using any ATM, both domestically and internationally. The virtual debit cards don’t charge any additional fees for using cash.
  • Effortless Deals Made Through an Online Portal: Payment banks, as opposed to conventional banks, simplify the exchange of money using online platforms. It makes it easier for users to use online fund transfer services like NIFT, IMPS, and many more.
  • A practical method of payment: You may easily use the services of payment banks no matter where you live because they operate digitally. By using Payments Banks, you can deposit or withdraw money without going to a real bank. By just obtaining a payment bank license, anyone can launch a payments bank business online without having a physical location.


  • Individuals/professionals
  • Mobile phone providers
  • Financial Company That Is Not a Bank (NBFCs)
  • Cooperatives in the real sector
  • Chains of supermarkets
  • Government agencies
  • A promoter or group of promoters with a joint venture with a scheduled commercial bank already in existence
  • Under the Payment and Settlement Systems Act of 2007, a non-bank prepaid payment mechanism is currently available.
  • Business-related correspondence
  • Public businesses


  • Payment banks in India are required to invest at least 75% of their demand deposit balances in government-issued securities or Treasury Bills with maturities up to 1 year, which are recognized by the Reserve Bank of India as eligible securities for maintaining SLR (Statutory Liquidity Ratio). Payment banks must have a minimum of Rs 100 crore in paid-up equity capital.
  • maintain at least 25% of its operations and liquidity management through current and time deposits with other scheduled commercial banks.
  • Foreign shareholding shall be governed by the private banks’ FDI Policy.
  • A leverage ratio of no less than 3% and a capital adequacy ratio of at least 15% of its risk-weighted assets are required.
  • The payment bank must be compelled to adhere to the rules established by the RBI on the management of liquidity risk since they may be exposed to operational or liquidity risk.


  • Under Section 22 of the Banking Regulation Act of 1949, a license must be granted to the payment bank before it may be formed as a public limited company under the Companies Act of 2013.
  • Any company with a legal presence in India that wishes to start a banking operation must apply for a payment bank license using Form III in accordance with Rule 11 of the Banking Regulation (Companies) Rules 1949.
  • The application should be sent to the Department of Banking Regulation’s Chief General Manager at the RBI.
  • The RBI will undertake the initial screening to determine whether a candidate appears to be eligible, and if necessary, additional criteria may also be used.
  • The applications will be evaluated by an External Advisory Committee (EAC), which is made up of illustrious individuals including Chartered Accountants, Bankers, Finance Professionals, etc.
  • The EAC has the authority to request information and speak with applicants as needed.
  • The RBI shall have final authority to decide whether to provide an in-principal authorization.
  • The bank must be established within the 18-month validity term of the in-principal permission.
  • The RBI may set further requirements and, if necessary, it may withdraw the in-principal permission if any unfavorable elements are discovered after the in-principal approval has been issued.


  • Demand deposits up to Rs 1 lakh per customer are accepted.
  • creation of debit cards.
  • Services for payments and remittances.
  • Distribution of financial products like insurance and mutual funds.
  • Issuing a prepaid payment method.
  • Services for online banking.
  • Serving as a bank’s commercial correspondent.
  • Payment of utility bills on behalf of the customers


  • NRI deposits cannot be accepted by a Payments Bank.
  • A Payment Bank must have at least Rs. 100 crores in paid-up capital.
  • A payment bank is permitted to provide ATMs or debit cards but not loans or Visa administrations.
  • Up to a predetermined amount, a Payment Bank may receive current deposits and Investment Funds Bank deposits from private ventures.
  • A payment bank must adopt RBI Compliances for technology risk management, web banking, data security, cyber laws, and electronic banking.
  • To set itself apart from other banks, a Payments Bank must have the words “Payments Bank” in its name.


  • The payment bank must invest at least 75% of its demand deposit balances in government-issued securities or Treasury Bills with maturities up to 1 year, as determined by the RBI, to maintain the statutory liquidity ratio (SLR).
  • Keep up to 25% of its total assets in current and time deposits with other scheduled commercial banks for both operational and liquidity management purposes.
  • The bank must have at least Rs 100 crore in paid-up capital.
  • It must maintain a leverage ratio of no less than 3% and a capital adequacy ratio of at least 15% of its risk-weighted assets.
  • Foreign shareholding shall be governed by the FDI policy for private banks.
  • Being the payment bank, they must abide by the rules established by the RBI regarding managing liquidity risk since they may encounter operational or liquidity risk.



Procedure for payment bank license

  • INCORPORATION OF COMPANY: According to RBI regulations, the license applicant must create a public limited company under the 2013 Companies Act. The primary function of the corporation should continue to be acting as a payment bank.
  • Application to RBI: The Chief General Manager of the Reserve Bank of India will receive an application for the issuance of a Payment Bank License (RBI).
  • Application Evaluation: The applicant may be called in for questions and to have his application’s information verified. The application will be evaluated by the External Advisory Committee (EAC), who will also call the applicant.
  • Granting of license: The applicant who successfully meets the eligibility requirements for License should be given the Payment Bank License by the RBI.
  • Online review of license: The names of the interested applicants for a bank license must be listed on the RBI’s official website.Approval of RBI: The RBI should grant the general permission for the operation of a payment bank. In 18 months, the Payment Bank should be operational after receiving RBI’s preliminary approval to do so.


  • There is no minimum balance that must be kept in the account.
  • In comparison to other banks, the Payment Bank offers greater interest rates.
  • High-security technology powers the Payment Bank.
  • It is simpler to remember your account number because it is the same as your cell number with Payment Bank.
  • The Payment Bank offers its clients the option of receiving cashback in their mobile wallets.
  • Customers can take advantage of offers from Payment Bank merchants such as cashback, discounts, and several other advantages.
  • Due to the banks’ extensive network, consumers can easily use the services of Payment Bank.


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