The Ministry of Electronics and Information Technology (MeitY) has been pushing various stakeholders to move towards digitalisation, setting up ambitious targets, including the target given to banks and payments banks for processing 30 Bn digital transactions for the financial year 2018-19.
The data provided from the latest performance report (till June 2019) by MeitY, as seen by Inc42, shows that five payments banks— Jio, Paytm, FINO, India Post and Airtel— have showed improved performance figures.
For the uninitiated, a Payments Bank can accept deposits of up to INR 1 lakh ($1,433), offer remittance services, mobile payments or transfers or purchases and other banking services like ATM/debit cards, net banking and third party fund transfers but cannot advance loans or issue credit cards.
The Reserve Bank of India has allowed 11 payments bank, out of which only six payments banks have been operational in India. They are Aditya Birla Payments Bank, Airtel Payments Bank, India Post Payments Bank, Fino Payments Bank, Jio Payments Bank, and Paytm Payments Bank.
Who Made It To The Target?
The targets for individual payments banks couldn’t be ascertained, however, the achievement performance showed that FINO Payments bank overachieved its targets covering 193.33% of its digital transactions target.
It was followed by Paytm Payments Bank, which achieved 106.54% of its digital transactions target. While Airtel Payments Bank achieved 96.98% of its target, Jio Payments bank achieved only 59.26% of the set digital transactions target.
The lowest target achievement was by India Post Payments Bank, which could only fulfill 1.86% of its targets. It is to be noted here that the payment bank has decided to change its future course by converting to a small finance bank. With this, the postal department aims to offer small loans to customer and open one crore bank accounts in 100 days.
Also, Aditya Birla Idea Payments Bank announced the shutdown of its operations on July 21, 2019.
The State Of Payments Banks In India
This leaves only four operational payments banks to lead the ambitious targets of the MeitY. For FY20, the MeitY has set up a target of 40 Bn digital transactions, a 33% hike from FY19. Paytm has been given a target of 5 Bn transactions through its payments bank and mobile wallet by MeitY. In a media statement, Paytm Payments Bank had said it has turned profitable for the fiscal year ending March 31, 2019 recording INR 19 Cr in profits.
The company’s income is said to be INR 1500 Cr, a 108% jump from its income of INR 721.96 Cr in the previous year. This growth comes at a time when the Reserve Bank of India is concerned with the net losses of payments banks during 2016-17 and 2017-18.
At the same time, Airtel Payments Bank filed a loss of INR 338.8 Cr in the financial year 2018-19. The company’s loss has increased by 24%, compared to last year’s loss of INR 272.6 Cr. Airtel Payments Bank has also witnessed an increase of 59% year-on-year (YoY) in revenues registering INR 254 Cr from INR160 Cr last year.
The sector has seen a collective loss of INR 516.5 Cr in July 2017-18, according to the RBI’s ‘Trend And Progress of Banking in India 2017-2018’ report. The losses had doubled from 2016-2017’s INR 242.2 Cr. The figure for this year is not available yet.
“The losses of payments banks are attributed to high operating expenses as large capital expenditure had to be incurred in setting up initial infrastructure. It may take some time for payment banks to break even as they expand their customer base by offering their unique banking products,” the 2017-2018 report stated.