Payments banks and small finance banks (SFBs) are both “differentiated banks”: they hold a banking licence but can do only part of what a full bank does. Exams love to ask the differences, the capital rules and the list of banks. Here is everything in one place.
Why were they created?
Both came from the Nachiket Mor Committee (2014) on financial inclusion. RBI issued guidelines in November 2014 and gave in-principle approvals in 2015: 11 for payments banks (August 2015) and 10 for SFBs (September 2015).
The main differences
| Feature | Payments Bank | Small Finance Bank |
|---|---|---|
| Purpose | Small savings and payments | Savings + loans to the unserved |
| Minimum paid-up capital | ₹100 crore | ₹200 crore (on-tap rules, 2019) |
| Deposits | Demand deposits only, max ₹2 lakh per customer (end of day) | All deposits, no cap |
| Lending | Not allowed (no loans or credit cards) | Allowed |
| PSL target | Not applicable | 60% of ANBC (from FY 2025-26; was 75%) |
| Small loans rule | – | At least 50% of loans must be up to ₹25 lakh |
| Capital adequacy (CRAR) | 15% (approx) | 15% (Tier I at least 7.5%) |
| Where money goes | At least 75% of demand deposits in govt securities (SLR) up to 1 year; up to 25% in other banks | Normal lending and investment |
| Can issue | Debit cards, ATM cards, UPI, remittances | Everything a bank does except some complex products |
| Can convert to | Can apply for SFB licence after 5 years | Can apply for universal bank licence (with conditions) |
The payments bank deposit cap was raised from ₹1 lakh to ₹2 lakh in April 2021.
What a payments bank can and cannot do
Can do:
- Accept savings and current account deposits (up to ₹2 lakh per customer)
- Issue debit/ATM cards, offer UPI, mobile banking and remittances
- Sell insurance and mutual funds; act as a business correspondent of another bank
- Pay bills and accept utility payments
Cannot do:
- Give loans of any kind
- Issue credit cards
- Accept fixed deposits or NRI deposits (NRI deposits are not allowed)
List of payments banks
| Payments Bank | Headquarters | Started |
|---|---|---|
| Airtel Payments Bank | New Delhi | 2017 (first to start, January 2017) |
| India Post Payments Bank | New Delhi | 2018 (pan-India launch 1 September 2018) |
| Fino Payments Bank | Navi Mumbai | 2017 |
| Jio Payments Bank | Mumbai | 2018 |
| NSDL Payments Bank | Mumbai | 2018 |
Paytm Payments Bank was barred from taking new deposits in 2024 and its licence was reported to be cancelled in 2026. Aditya Birla Idea Payments Bank closed in 2019.
List of small finance banks
| Small Finance Bank | Headquarters | Started (approx) |
|---|---|---|
| Capital SFB | Jalandhar | 2016 (first SFB) |
| Equitas SFB | Chennai | 2016 |
| AU SFB | Jaipur | 2017 |
| ESAF SFB | Thrissur | 2017 |
| Suryoday SFB | Navi Mumbai | 2017 |
| Ujjivan SFB | Bengaluru | 2017 |
| Utkarsh SFB | Varanasi | 2017 |
| slice SFB (formerly North East SFB) | Guwahati | 2017 |
| Jana SFB | Bengaluru | 2018 |
| Shivalik SFB | Noida | 2021 (first urban co-op bank to become an SFB) |
| Unity SFB | New Delhi | 2021 (took over PMC Bank) |
AU SFB to universal bank
In August 2025, RBI gave in-principle approval to AU Small Finance Bank to convert into a universal bank, the first SFB to get this approval. RBI rules allow an SFB to apply if it has a 5-year track record, net worth of at least ₹1,000 crore, listed shares and good asset quality (net NPA within limits).
Exam-ready one-liners
- Payments banks and SFBs came from the Nachiket Mor Committee (2014).
- Payments bank minimum capital: ₹100 crore; SFB: ₹200 crore.
- Payments bank deposit limit: ₹2 lakh per customer (since April 2021).
- Payments banks cannot lend or issue credit cards.
- SFB PSL target: 60% (from FY 2025-26).
- At least 50% of SFB loans must be up to ₹25 lakh.
- First payments bank to start: Airtel Payments Bank (2017).
- First SFB: Capital Small Finance Bank (2016).
- AU SFB got in-principle approval to become a universal bank in 2025.
Related reading
Quiz: test yourself
Based on RBI guidelines as reported. Lists and limits may change; check rbi.org.in for the latest.