New Delhi, Dec. 24 -- Payments banks are an odd hybrid-part bank, part wallet, part financial marketplace.

They accept deposits like banks, but unlike full-service lenders, they are not allowed to lend. Instead, customer deposits are invested in government securities, generating a modest interest spread and occasional treasury gains.

Beyond this, payments banks earn fees and commissions from a wide range of activities: digital payments, remittances, micro-ATM and Aadhaar Enabled Payment System (AePS) transactions, debit cards, sale of third-party products such as insurance, gold loans and fixed deposits, business correspondent services for regular banks, FASTag issuance and processing, and cash management for corporates.

There are six ...