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.

Select the correct answer using the code given below:

The correct answer is 1 and 3 only.

This question tests your knowledge of the Reserve Bank of India (RBI) guidelines on Payment Banks, introduced to further the goal of financial inclusion by bringing banking services to underserved and unbanked populations. Let us analyze each statement carefully.

Statement 1: Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks.

✅ This statement is CORRECT.

According to the RBI's guidelines on Licensing of Payment Banks (released in November 2014), a wide range of entities are eligible to apply as promoters or promoter groups for setting up Payment Banks. The eligible entities include:

• Existing non-bank Pre-paid Payment Instrument (PPI) issuers
• Other entities such as individuals, professionals, and non-banking finance companies (NBFCs)
• Mobile telephone companies
• Supermarket chains
• Real sector cooperatives
• Public sector entities

A critical condition, however, is that these entities must be owned and controlled by residents (i.e., Indian residents). This ensures that the control of such sensitive financial institutions remains within India. Since Statement 1 correctly captures both the eligibility of mobile companies and supermarket chains and the residency condition, it is entirely accurate.

Statement 2: Payment Banks can issue both credit cards and debit cards.

❌ This statement is INCORRECT.

This is a very commonly tested distinction. As per RBI guidelines, Payment Banks are permitted to issue debit cards and ATM cards to their customers. However, Payment Banks are strictly prohibited from issuing credit cards.

The reason for this prohibition is directly tied to the fundamental nature of a Payment Bank — it is not allowed to undertake any lending or credit activities (as confirmed by Statement 3). A credit card is essentially an instrument of short-term credit/lending. Since Payment Banks cannot lend, they logically cannot issue credit cards either. Therefore, Statement 2 is false, and any option containing Statement 2 is automatically eliminated.

Statement 3: Payment Banks cannot undertake lending activities.

✅ This statement is CORRECT.

The RBI guidelines are unambiguous on this point. Payment Banks are not allowed to undertake lending activities of any kind. This means they cannot give out loans, advances, or any form of credit to customers. This is one of the most defining restrictions that separates a Payment Bank from a regular commercial bank.

Instead, Payment Banks are designed to focus on:

• Accepting demand deposits (savings and current accounts) up to a prescribed limit per individual customer (currently ₹2,00,000)
• Providing payments and remittance services
• Distributing third-party financial products like mutual funds and insurance
• Issuing debit cards and ATM cards for accessing deposits

The funds collected as deposits by Payment Banks must be invested in government securities or treasury bills, not lent out to borrowers. This makes Statement 3 completely accurate.

Conclusion:

• Statement 1 ✅ — Correct (Mobile companies and supermarket chains owned by residents are eligible promoters)
• Statement 2 ❌ — Incorrect (Payment Banks can issue debit cards, NOT credit cards)
• Statement 3 ✅ — Correct (Payment Banks are prohibited from lending activities)

Since only Statements 1 and 3 are correct, the answer is unambiguously Option: 1 and 3 only.