Two differentiated bank licences created by the RBI

A payments bank may accept deposits up to a capped end-of-day balance of Rs 2 lakh per customer, issue debit cards, and offer remittance and payment services - but it cannot lend or issue credit cards. A small finance bank is a full-service lender: it can accept unrestricted deposits and must direct a large share of its credit to small borrowers, with priority sector lending targets far above those of a universal bank. That is why the conversion route matters commercially - it turns a fee-earning payments platform into an institution that can earn interest income. The RBI opened this route to payments banks that are resident-controlled and have completed five years of operations, and Fino was the first to clear the in-principle stage, in December 2025.