Payments banks are a new model of banks conceptualised by Reserve Bank Of India (RBI).The idea was first floated by RBI Committee led by Board member Nachiket Mor. The committee on comprehensive financial services for small businesses and low income formed in 2013 came out with its report in early-2014. As a part of the recommendations of the Nachiket MOR Committee, a special category called ‘Payment Banks’ had been proposed. Main objective of Payment bank is to reduce the working burden of Commercial banks. The concept of payments bank kills two birds with one stone.

Firstly, it gives an impetus to the financial inclusion initiative by widening the digital payment infrastructure. Secondly, it encourages the FinTech culture in the Indian banking landscape and indicates RBI is in tune with times, despite its legacy.It is a bank whose banking services have been striped-down to only use mobile phones for availing its services instead of traditional bank branches. These banks can accept a restricted deposit, which is currently limited to ₹1 lakh per customer and may be increased further. These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks. Payments banks can issue services like ATM cards, debit cards, net-banking and mobile-banking. The banks will be licensed as payments banks under Section 22 of the Banking Regulation Act, 1949, and will be registered as public limited company under the Companies Act, 2013 Airtel has launched India's first live payment banks. Paytm is the second such service to be launched in the country. India Post Payments Bank is the third entity to receive payments bank permit after Bharti Airtel and Paytm. After a lot of scrutiny and examination, RBI finally gave ‘in-principle’ licences to various entities to launch payments banks on August 19, 2015 butby May 2016, some entities dropped out, leaving only some in functioning. Further, the RBI was to consider granting full licenses under Section 22 of the Banking Regulation Act, 1949 and this is for the first time in the history of India’s banking industry that the RBI has given out differentiated licenses for specific activities. The move is seen as a major step in pushing financial inclusion in the country and the expectations with India’s payment banks are huge. It’s majorly to serve India’s migrant labourers, low-income households and small businesses, offering savings accounts and remittance services with a low transaction cost. There are further many benefits of payments bank account such as it’s a zero balance account, higher interest rate, account number is same as the mobile number, cashback and discount offers, approachable, convenient, safe and secure Thus, Payment Banks promise to be a successful step because of the use of mobile platform to provide basic banking transactions. The decision to license some of the country’s biggest corporate and mobile telecom firms to start payment banks is a positive move towards the success of Payment Banks.