Payments Banks: Cashless Banking For The Unbanked

The government led demonetization drive in November 2016 led to a surge in the usage of digital payments in India with even mom and pop stores and hawkers embracing cash-free payment options. Mobile wallets suddenly became the buzzword and gained mainstream acceptance from being seen as a niche player. The other aspect that came into the spotlight was India's low financial inclusion rate (only around 35% of adults in India had access to a formal bank account¹) and how the benefits of going digital can be leveraged to increase financial inclusion for the teeming millions. Conceptually this is one of the key drivers of payment banks in India.

What is a Payments Bank?

A payments bank is a differentiated micro-bank with limited banking functions set up under the payments banks guidelines issued by the Reserve Bank of India ("RBI") in November 2014² ("Guidelines"). These banks are allowed to provide basic financial services through a smart phone as it may not be