A 2014 RBI committee report imagined a bank account for every Indian adult, and a payment point within a 15-minute walk of anywhere. Its ideas reshaped Indian banking. But its most famous creation, the payments bank, has had a rougher ride than the report predicted.
MCQ QuestionsNachiket Mor Committee
Jan 2014
RBI’s Committee on Comprehensive Financial Services report
Chaired by Nachiket Mor, then an RBI Central Board member.
Core Proposal
UEBA for All
A bank account for every resident above 18, by 1 Jan 2016.
Access Target
15-Min Walk
To the nearest payment access point, for every resident.
RBI Result (2015)
11 Payments Banks
In-principle approvals, from 41 applications.
Reality Check
Only 7 Launched
Several licensees surrendered before ever operating.
🏦 Must Know
The Committee and Its Mandate
- Committee The RBI set up the Committee on Comprehensive Financial Services for Small Businesses and Low Income Households in September 2013. It was chaired by Nachiket Mor, then a member of the RBI’s Central Board.
- Report The Committee released its report in January 2014.
The UEBA Proposal
- Headline Idea Its headline proposal was a Universal Electronic Bank Account (UEBA). It recommended giving every Indian resident above 18 a full-service electronic bank account, by 1 January 2016.
- Access Target It set an access target: every resident should be within a 15-minute walk of a payment access point.
Vertically Differentiated Banking
- Structure The Committee recommended a vertically differentiated banking system. This included Payments Banks, focused on deposits and payments, separate from banks built for credit and lending.
💳 Good to Know
Capital Requirement: Suggested vs. Actual
- Committee Ask The Committee suggested a minimum capital of ₹50 crore for Payments Banks, a tenth of what applied to regular new banks.
- RBI Set The RBI, when it actually implemented the idea, set the requirement higher, at ₹100 crore.
Licensing: Applications and Approvals
- Applications The RBI received 41 applications for payments bank licences. It granted in-principle approval to 11 of them, in 2015.
- Small Finance Banks Around the same time, the RBI separately approved 10 entities for Small Finance Bank licences, a related but distinct category built around the same “differentiated banking” philosophy.
Who Can Promote a Payments Bank, and What It Can’t Do
- Eligible Promoters RBI’s Payments Bank guidelines named specific eligible promoter categories: existing non-bank prepaid-instrument (PPI) issuers, non-banking finance companies, corporate business correspondents, and — notably — mobile telephone companies and supermarket chains owned and controlled by residents.
- Cards A Payments Bank can issue ATM or debit cards, for withdrawals and payments. It cannot issue credit cards.
- No Lending A Payments Bank cannot undertake any lending activity. It can only accept deposits, up to a prescribed limit, and offer payments, remittance, and other non-credit services.
Implementation Was Uneven
- Surrenders Several payments bank licensees, including Cholamandalam and a joint IDFC Bank-Telenor venture, surrendered their approvals before ever launching.
- Launch Rate Only 7 of the 11 approved payments banks began operations.
Test Yourself
🔍 Great to Know
Payments Bank Licences Can Also Be Cancelled
- Paytm Even a payments bank that launched successfully is not guaranteed a smooth future. The RBI cancelled Paytm Payments Bank’s licence, once India’s largest payments bank, after a systems audit found persistent KYC and compliance violations.
A Wider Financial-Inclusion Story
- Related Scheme The Committee’s broader financial-inclusion vision extended well beyond bank accounts. Delivery-focused schemes built later, like PMJDY, are covered separately in IndEco0132 — Financial Inclusion in India: PMJDY and the JAM Trinity.
What Survived, and What Didn’t
- Core Idea The core idea, differentiated banking for different financial needs, did survive and reshape Indian banking. But specifics diverged from the Committee’s original numbers, and outcomes have varied sharply between individual licensees.
- Pattern This is a familiar pattern across expert committees: a concept can succeed and reshape policy, even while several of its specific numbers and named recommendations play out very differently in practice.
📝 Previous Year Question
UPSC CSP 2017 — Purpose of Small Finance Banks
- UPSC 2017 Asked as: “What is the purpose of setting up of Small Finance Banks (SFBs) in India? 1. To supply credit to small business units. 2. To supply credit to small and marginal farmers. 3. To encourage young entrepreneurs to set up business particularly in rural areas.” (UPSC CSP 2017, GS Paper I). The correct answer is (d) 1, 2 and 3 — the RBI set up Small Finance Banks to further financial inclusion, by supplying credit to small business units, small and marginal farmers, and other underserved rural entities. See the full transcription at UPSC CSP 2017 GS Paper I, Q40.
UPSC CSP 2016 — Payment Banks: Promoters, Cards, and Lending
- UPSC 2016 Asked as: “The establishment of ‘Payment Banks’ is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context? 1. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks. 2. Payment Banks can issue both credit cards and debit cards. 3. Payment Banks cannot undertake lending activities.” (UPSC CSP 2016, GS Paper I). The correct answer is (b) 1 and 3 only — see the full transcription at UPSC CSP 2016 GS Paper I, Q4.
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