Loan Singh Explains – The Purpose of Payments Bank in India



In the middle of September 2017, the Airtel Payments Bank announced its integration with United Payments Interface (UPI). This made Airtel Payments Bank the first of its kind to integrate with UPI. We get many queries related to payments bank and today we plan to answer each of those.

Loan Singh is a digital lending platform with a mission to serve the under-served and salaried individuals – who face personal loan rejections from traditional lending institutions. Similar to Airtel Payments Bank helping the under-banked individuals to open a bank account and make digital payments, Loan Singh creates a better experience by incorporating data & technology to traditional banking practices. Let’s understand what a payments bank is and how Loan Singh, not being a bank, facilitates personal loans to salaried individuals.


Payments Bank

A payments bank is a type of bank that operates at a smaller scale compared to a normal bank. It can carry out banking operations and can accept demand deposits of up to Rs.1,00,000, but cannot provide loans or issue any credit cards. A payments bank offers remittance services, mobile payments and also offers debit cards, net-banking and third-party fund transfers.

The Reserve Bank of India (RBI) wanted to provide an impetus to the financial inclusion initiatives. Keeping this in mind, RBI decided to create new niche categories in the finance industry by introducing ‘Payments Bank’ and ‘Small Bank’.  While Small Banks provide all banking services in a limited operational area, Payments Bank provide a limited range of banking products in rural areas. As per statistics, close to 40% of India’s total population has little or no access to traditional banking services. To combat this hurdle, in the path towards financial inclusion, the licensing of Payments Bank was important.

In February 2015, RBI released a list of entities who had applied for a Payments Bank Licence. Around 41 applicants were evaluated. On 19th August 2015, the RBI gave ‘In-Principle’ Licence to 11 entities for launching Payment Banks. These were

  • Airtel Mcommerce Services
  • Paytm
  • Department of Posts
  • FINO PayTech
  • Aditya Birla Nuvo
  • Cholamandalam Distribution Services
  • National Securities Depository
  • Reliance Industries
  • Sun Pharmaceuticals
  • Tech Mahindra
  • Vodafone M-Pesa

Out of these, Cholamandalam Distribution Services, Sun Pharmaceuticals, and Tech Mahindra have surrendered their licences.

As per RBI guidelines, the Payments Bank should be registered as a public limited company under the Companies Act of 2013 and licensed under Section 22 of the Banking Regulation Act of 1949.


Working of Payments Bank

The primary role of a Payments Bank is to provide payment and remittance services to the people belonging to the areas which they service. They can accept demand deposit, issue prepaid payment instruments, enable internet banking, etc. Payments Bank, however, cannot indulge in lending credit activities, and will need to distinguish themselves from other banks by using ‘PAYMENTS’ in their names. They will be initially restricted to hold a maximum balance of Rs.1,00,000 per customer for both – current and savings account. This will be raised only once RBI gauges the Payments Bank’s performance. A Payments Bank can issue ATM or debit cards, but are not allowed to issue credit cards. They can distribute financial products like mutual funds and insurance. The documentation required to open an account is the same as that at normal banks. Payments Banks are expected to change the ‘one-size-fits-all’ approach in commercial banking. They will cater to the lower income group.

The first payments bank was launched by Bharti Airtel. Paytm succeeded them, and were followed by India Post Payments Bank. With such a variety of applicants, the competition in the payments banking sector is expected to increase. This will only benefit the consumers in terms of policies, products and technology. Payments Bank is expected to reach customers mainly through their mobile phones. The operations of the bank would be fully networked and technology driven from the outset. Proper grievance cell would be set-up to handle consumer complaints.

A virtual account will be opened on the basis of the consumer’s unique mobile number. The consumer can then perform transactions or make remittances, to a registered merchant or user, through a web based mobile application or through a USSD gateway. Moreover, the user can withdraw cash or top-up their accounts from retail points (vendor, ATM, agent, etc.) – recognized by their Payments Bank service provider.


Payments Bank Advantages

Along with the benefits of allowing transfers and remittances through a mobile phone, a Payments Bank also provides many benefits to the account holder. Some of these benefits are

  • Automatic payment of bills
  • Cashless and chequeless purchase through phone
  • Issue debit cards and ATM cards to withdraw cash from any Banks’ ATM
  • Transfer money directly from your account to others
  • Provide Forex cards to travelers which can be used as a debit card
  • Forex services – at charges lower than banks
  • Card acceptance mechanism with third parties, such as ‘Apple Pay’
  • Raise deposits of up to Rs.1,00,000 and pay interest on savings account


Payments Bank for the Future

Payments Bank will redefine banking in India. Payments Bank will mainly target migrant labor, young professionals, low income households, and small businesses – to aid in the upward growth of GDP. With Payments Bank, for the first time in the history of Indian banking, RBI has given out differentiated licenses for specific activities. Low earning citizens of India, who transact only in cash, will be able to take a step towards formal banking. It could have been non-profitable for traditional banks to open branches in every village in India but mobile phone coverage can help scale to remote parts of India, as well. This will also accelerate India’s stride towards a cashless economy. Subsidies on health care, education and gas, can be paid directly to the beneficiaries’ account. With money transfers made possible through mobile phones, a big chunk of India’s migrant labor population could easily shift to this platform.

UPI can help merge several banking features, including seamless fund routing and merchant payments, under one roof. In other developing countries, Payments Bank has proved to be beneficial. For e.g. In Kenya, Vodafone M-Pesa has witnessed success; making purchases and transferring of funds between friends and relatives, easier.


Personal Loan from Loan Singh

Payments bank may not be able to give you a personal loan, but Loan Singh certainly can.

Before you begin the quick and easy application process at Loan Singh, check the following eligibility criteria required for a personal loan.


To avail a personal loan from Loan Singh, you need to be a salaried individual with a minimum monthly salary of Rs.15,000.

Credit Score

Loan Singh looks at your credit score, to evaluate your creditworthiness, before approving the loan. A credit worthy borrower is someone who has been prompt in his/her previous loan EMI payments, maintains a good credit utilization ratio, has been paying his/her credit card bill on time, and has never overspent over the credit card limit. If you have never availed a loan before, you will have no credit history. In that case, you need to be salaried for at least 3 months to be eligible for a loan at Loan Singh. The lower your credit score, the lower your chances of being eligible for a personal loan.


You need to be at least 21 years of age to be considered eligible for availing a personal loan with Loan Singh. As mentioned above, you must be of Indian nationality and salaried, as well.

Financial stability

You need to have a stable monthly income. A good budget is advised to avoid times when you might find it hard to pay-off the loan EMIs.

Swift processing – At Loan Singh, everything from application to disbursement happens online. With only Aadhaar, PAN and Bank statement/netbanking credentials, you can apply for a personal loan and pay for your emergency requirements.

No collateral – Having no collateral requirement gives a personal loan an advantage over the secured loan. Even if you do not own any assets, you can at least get funds from Loan Singh.

Multiple purposes – A personal loan can be availed for a number of purposes such as purchase of household appliances, electronic gadgets, purchase of gold, holiday travel, home improvement, job relocation, medical expenses, home renovation, purchase of second hand vehicles, marriage, etc.

Loan amount and tenure – The loan amount for a personal loan at Loan Singh can range from Rs.50,000- Rs.5,00,000. The repayment is done via EMIs, with interest rates on reducing balance method. The personal loan tenure can be from 3 to 36 months.


Application Process at Loan Singh

Not only is a personal loan the best alternative for quick funds, Loan Singh’s quick and easy application process also helps you get the funds you need for any financial emergency. The process to get an easy and quick loan with Loan Singh is mentioned below:

If you find yourself fitting Loan Singh’s criteria, log on to and apply for an online personal loan. You will need to keep your Aadhaar, PAN and bank details handy. Here is how the process goes.

Get started page – Select ‘PERSONAL LOAN’ from the dropdown and enter the loan amount with the desired repayment tenure.

Registration page – Add your contact number, personal email ID, and corporate email ID

Social authorization – Connect to your Facebook, Google+ and LinkedIn profiles, to avail a lower interest rate.

Profile page – Fill in your name, gender, Father’s name, number of dependents, and PAN details. We use your PAN Card Number to check your Credit Score.

Address page – Choose your type of residence, and mention your street address, city, state and pin code.

Job profile page – Mention your current designation, total work experience, company name, highest qualification, last institution attended, and monthly salary.

Financials page – Upload your latest 6 months bank statement (in PDF format) either from your computer, GMail account or net-banking account directly. Our net-banking partner is ISO 27001 (2013 standard) certified & provides services to banks, as well.

Auto debit page – Provide permissions to your bank name, account number, and IFSC code so that Loan Singh can auto debit the EMI amount from your account every month. This way you don’t need to set reminders or miss out on any loan EMI payments.


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