Special types of banks: Women Bank, Payments Bank, Savings Bank, Microfinance Banks

Women Bank

A women-only bank is a financial institution catering exclusively to women. In 2001, Dubai Islamic Bank opened a women-only bank branch.

Iran opened such a bank in Mashhad on June 7, 2010. The bank’s director stated, “the aim is not sex segregation but respect for women.” The government-owned bank is Bank Melli.

In Saudi Arabia, most banks have some sort of women-only branch within the main branch. Not necessarily all branches and banks have this. Albeit the main branch can usually be accessed by both men and women.

in 2013, India launched its first public sector bank for women only, in Mumbai, aimed at economically empowering millions of women in India.

Payments Bank

Payments banks are new model of banks, conceptualised by the Reserve Bank of India (RBI), which cannot issue credit. These banks can accept a restricted deposit, which is currently limited to 200,000 per customer and may be increased further. These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks. Payments banks can issue ATM cards or debit cards and provide online or mobile banking. Bharti Airtel set up India’s first payments bank, Airtel Payments Bank.

Features of Payment Banks

• They are differentiated and not universal banks.
• These operate on a smaller scale.
• It needs to have a minimum paid-up capital of Rs. 100,00,00,000.
• Minimum initial contribution of the promoter to the Payment Bank to the paid-up equity capital shall at least be 40% for the first five years from the commencement of its business.

Activities that Can Be Performed By Payment Banks

• The money received as deposits can be invested in secure government securities only in the form of Statutory Liquidity Ratio (SLR). This must amount to 75% of the demand deposit balance. The remaining 25% is to be placed as time deposits with other scheduled commercial banks.
• Payment banks can take deposits up to Rs. 2,00,000. It can accept demand deposits in the form of savings and current accounts.
• Payments banks will be permitted to make personal payments and receive cross border remittances on the current accounts.
• It can issue debit cards.

Savings Bank

A savings bank is a financial institution whose primary purpose is accepting savings deposits and paying interest on those deposits.

They originated in Europe during the 18th century with the aim of providing access to savings products to all levels in the population. Often associated with social good, these early banks were often designed to encourage low-income people to save money and have access to banking services. They were set up by governments or by socially committed groups or organisations such as with credit unions. The structure and legislation took many different forms in different countries over the 20th century.

Savings banks and savings-and-loans are often confused. The original function of savings banks to service consumers was limited to savings. Savings banks invested in government and corporate debt. Savings and loan associations had a dual purpose which gave more importance to home loans. Towards the end of the 20th century their functions blurred as savings banks issued mortgages.

The advent of Internet banking at the end of the 20th century saw a new phase in savings banks with the online savings bank that paid higher levels of interest in return for clients only having access over the web.

Microfinance Banks

Microfinance is a category of financial services targeting individuals and small businesses that lack access to conventional banking and related services. Microfinance includes microcredit, the provision of small loans to poor clients; savings and checking accounts; microinsurance; and payment systems, among other services. Microfinance services are designed to reach excluded customers, usually poorer population segments, possibly socially marginalized, or geographically more isolated, and to help them become self-sufficient.

Microfinance initially had a limited definition: the provision of microloans to poor entrepreneurs and small businesses lacking access to credit. The two main mechanisms for the delivery of financial services to such clients were:

(1) Relationship-based banking for individual entrepreneurs and small businesses.

(2) Group-based models, where several entrepreneurs come together to apply for loans and other services as a group.

Over time, microfinance has emerged as a larger movement whose object is: “a world in which as everyone, especially the poor and socially marginalized people and households have access to a wide range of affordable, high quality financial products and services, including not just credit but also savings, insurance, payment services, and fund transfers.”

Proponents of microfinance often claim that such access will help poor people out of poverty, including participants in the Microcredit Summit Campaign. For many, microfinance is a way to promote economic development, employment and growth through the support of micro-entrepreneurs and small businesses; for others it is a way for the poor to manage their finances more effectively and take advantage of economic opportunities while managing the risks. Critics often point to some of the ills of micro-credit that can create indebtedness. Many studies have tried to assess its impacts.

New research in the area of microfinance call for better understanding of the microfinance ecosystem so that the microfinance institutions and other facilitators can formulate sustainable strategies that will help create social benefits through better service delivery to the low-income population.