Explanation:

Only statements 1&2 are correct.

• The Reserve Bank of India (RBI) recently imposed restrictions on Paytm Payments Bank Ltd (PPBL), following a system audit report and subsequent compliance validation report of external auditors. 

About Payments Bank

• A payments bank is like any other bank but operates on a smaller scale without involving any credit risk. 

• It was set up based on the recommendations of the Nachiket Mor Committee.

• Objective: To advance financial inclusion by offering banking and financial services to the unbanked and underbanked areas, helping the migrant labour force, low-income households, small entrepreneurs, etc.

• It is registered as a public limited company under the Companies Act 2013 and licensed under Section 22 of the Banking Regulation Act 1949.

• It is governed by a host of legislation, such as the Banking Regulation Act, 1949; RBI Act, 1934; Foreign Exchange Management Act, 1999, etc.

Features

• They are differentiated, and not universal banks.

• These operate on a smaller scale.

• The minimum paid-up equity capital for payments banks shall be Rs. 100 crores.

• The minimum initial contribution of the promoter to the Payment Bank to the paid-up equity capital shall be at least 40% for the first five years from the commencement of its business.

Activities that can be performed

• It can take deposits up to Rs. 2,00,000. It can accept demand deposits in the form of savings and current accounts.

• 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.

• It can offer remittance services, mobile payments/transfers/purchases, and other banking services like ATM/debit cards, net banking, and third-party fund transfers.

• It can become a banking correspondent (BC) of another bank for credit and other services which it cannot offer.

Activities that can be performed

• It cannot issue loans and credit cards.

• It cannot accept time deposits or NRI deposits.

• It cannot set up subsidiaries to undertake non-banking financial activities.

Hence option 2nd is correct.