Payments Banks, a new category of niche banks introduced by the RBI based on the Nachiket Mor Committee recommendations, can accept demand deposits but are strictly prohibited from undertaking any ___ activities.

Answer: lending (or credit)

Payments Banks are designed to provide safe, secure, and widespread payment and remittance services to migrant laborers and low-income households. While they can accept deposits (up to a specified limit) and issue debit cards, they cannot issue credit cards or lend money directly. They must invest their mobilized deposits in safe government securities and SLR-eligible bonds.