Indian payments banks (PBs) have registered a 21% hike in their aggregate losses from INR 512 Cr in financial year 2018 to INR 626.8 in FY19, ending March 2019.
The Reserve Bank of India (RBI), in its ‘Trend and Progress of Banking in India’ report, noted that only seven payments banks were operational in India by the end of FY 2019, while India only had 5 of these in FY18.
Interestingly, the RBI had licenced 11 payments banks, but only seven have started their operations in India. These include Aditya Birla Payments Bank, Airtel Payments Bank, India Post Payments Bank, Fino Payments Bank, Jio Payments Bank, and Paytm Payments Bank.
Even though the deposits are capped at INR 1 Lakh, PBs have still outshined by doubling their deposits this year to INR 883 Cr from INR 438 in FY19. However, the increased deposits have come with a set of liabilities. The payments banks have managed to increase their liabilities from 9% in 2018 to 12.4 % in 2019.
In addition to everything else, PBs have also increased their interest income by 45% from INR 255 Cr last year to INR 2,093 Cr this year. The payment’s bank’s remittance through payments bank also took a 23% hike, accounting for INR 1.10 Lakh Cr) in FY19. In 2018, the PB’s remittance was recorded to be 89K. The report also highlights that RBI’s decision to allow PBs customers to perform transactions 24×7 has increased the transaction limit as well.
The RBI’s report also states that the payments bank has a limited operational space available to them and the expense of setting up an infrastructure is pretty high. Therefore it is difficult for payments banks to break even, despite getting new customers.
A payments bank is like any other regular bank even though it operates on a smaller scale. Due to limitations in its geographical offerings, payments banks also have a limited services offering. To bridge these gaps many banks are applying for small finance bank licences.
Payments banks allow users to create savings accounts, which do not require any account opening charges and minimum balance. They also offer other services like remittance services, mobile payments, money transfers and purchases, among other banking services. However, they cannot furnish loans or issue credit cards, but the government is trying to change that as well by allowing PBs to seek licenses for small finance banks (SFB).