India’s first Payments Bank was Airtel Payments Bank, launched in January 2017 by Bharti Airtel. Subsequently, several other Payments Banks commenced operations, including Paytm Payments Bank, India Post Payments Bank, Fino Payments Bank, and Aditya Birla Payments Bank.
RBI Approved Payments Bank Applicants
In August 2015, the Reserve Bank of India granted “in-principle” approval to 11 entities for setting up Payments Banks:
- Aditya Birla Nuvo Limited
- Airtel M Commerce Services Limited
- Cholamandalam Distribution Services Limited
- India Department of Posts
- Fino PayTech Limited
- National Securities Depository Limited
- Reliance Industries Limited (Jio)
- Dilip Shanghvi
- Paytm Payments Bank Limited
- Tech Mahindra Limited
- Vodafone m-pesa Limited
Entities that Surrendered Their Licence
The following applicants surrendered their Payments Bank licences before commencing operations:
- Cholamandalam Distribution Services Limited
- Dilip Shanghvi
- Tech Mahindra Limited
Active Payments Banks in India
The major active Payments Banks are:
- Airtel Payments Bank
- India Post Payments Bank
- Fino Payments Bank
- Jio Payments Bank
- NSDL Payments Bank
Defunct Payments Banks
Some Payments Banks discontinued operations due to business and regulatory challenges:
- Aditya Birla Payments Bank (closed on 26 July 2019)
- Vodafone m-pesa Limited
- Paytm Payments Bank (ceased Payments Bank operations after RBI regulatory action)
Criticism of the Payments Bank Model
The Payments Bank model has faced criticism regarding its long-term financial viability. Banking expert S. Kalyanasundaram argued that the model is difficult to sustain because Payments Banks are not allowed to lend money, which is the primary source of income for traditional banks. Additionally, they must maintain regulatory requirements such as the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). As a result, Payments Banks have limited opportunities to generate revenue and often depend on transaction fees and commission-based income, making profitability a significant challenge.
Conclusion
Payments Banks were introduced to strengthen financial inclusion and promote digital payments in India. Although they have successfully expanded access to banking services, especially through mobile and digital platforms, restrictions on lending and limited revenue sources have created challenges for sustainable profitability. Despite these constraints, active Payments Banks continue to play an important role in India’s digital banking ecosystem and financial inclusion efforts.