Regional Rural Banks (RRBs) and Payments/Small Finance Banks

Regional Rural Banks (RRBs) were set up under the Regional Rural Banks Act, 1976, specifically to bridge the credit gap in rural areas that neither commercial banks nor cooperative banks were adequately serving. Each RRB is jointly owned by the Central Government, the concerned State Government, and a sponsoring public sector commercial bank, in a fixed shareholding pattern, with the sponsor bank providing managerial and financial support. RRBs mainly extend credit to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs in the specific region they are set up to serve, combining a cooperative bank's local, rural focus with a commercial bank's professional management.

Payments Banks are a newer, RBI-licensed category (introduced from 2015) that can accept deposits (up to a prescribed ceiling per customer), offer payments and remittance services, issue debit cards and mobile-based transactions, but are not permitted to lend or issue credit cards — designed to extend basic banking and payment services to the unbanked and under-banked, particularly using mobile-based technology (e.g. India Post Payments Bank, Airtel Payments Bank).

Small Finance Banks (SFBs) are also a newer RBI-licensed category that CAN both accept deposits and extend loans, but are focused specifically on serving small business units, small and marginal farmers, micro and small industries, and other underserved/unorganised sector entities — bridging the gap between microfinance institutions and full-service commercial banks (e.g. AU Small Finance Bank, Equitas Small Finance Bank).

| Basis | Payments Bank | Small Finance Bank |

|---|---|---| …