Consider the following statements regarding Payment Banks:

1. Payment Banks can carry out all banking operations, including advancing loans and issuing credit cards.

2. They were set up based on the recommendations of the Nachiket Mor Committee.

3. Payment Banks can establish subsidiaries to engage in non-banking financial activities.

Which of the statements given above is/are correct?

The correct answer is option 2.

In News

• Paytm Payments Bank has been in the news for regulatory actions over persistent non-compliance with payment bank rules.

Key Points

• Payment Banks operate on a smaller scale than commercial banks and cannot issue loans or credit cards. Hence, Statement 1 is incorrect.
• They were set up based on the recommendations of the Nachiket Mor Committee, which aimed to increase financial inclusion by providing banking services to underserved sections. Hence, Statement 2 is correct.
• Payment Banks are not allowed to establish subsidiaries for engaging in non-banking financial activities. Hence, Statement 3 is incorrect.

Additional Information

• Permitted Activities: Accept deposits up to ₹2,00,000, offer savings and current accounts, facilitate remittances and digital payments, and act as banking correspondents for other banks.
• Restrictions: Cannot offer loans, issue credit cards, accept NRI deposits, or engage in non-banking financial services.
• Reserve Requirements: Must invest 75% of their deposits in government securities and keep 25% as time deposits with scheduled commercial banks.