Context:
Payments banks in India have approached the Union Finance Ministry, requesting an increase in their individual account deposit limit from the current ₹2 lakh to ₹5 lakh. This proposal was discussed in a meeting chaired by Department of Financial Services Secretary M. Nagaraju in New Delhi.
Payment Banks
Payment banks are specialized financial institutions, introduced by the Reserve Bank of India (RBI), that focus on providing basic banking services like deposits, withdrawals, and remittances, primarily through digital channels, to the unbanked and underbanked populations, but cannot issue loans or credit cards.
Key Highlights
- The last revision in deposit limits happened in April 2021, when it was raised from ₹1 lakh to ₹2 lakh.
- Payments banks have also requested permission to lend to the microfinance sector with regulated loan caps, allowing them to diversify revenue streams.
- Currently, payments banks are only allowed to invest funds in government securities as per RBI regulations.
Small Finance Bank Conversion
- The meeting also covered the process for payments banks to convert into small finance banks (SFBs).
- As per RBI norms, payments banks can apply for conversion after five years of operations and meeting capital requirements, including a minimum paid-up equity capital of ₹200 crore.
- Fino Payments Bank has already applied for an SFB licence.
IPPB Recognized for Financial Inclusion
- India Post Payments Bank (IPPB) was appreciated by government officials for its efforts in financial inclusion and doorstep banking services.
- IPPB currently operates 650 branches and over 163,000 access points across India and offers a range of financial services, including savings accounts, virtual debit cards, bill payments, and insurance.
Current Players in the Payments Bank Sector
- Out of the 11 payments bank licences granted in 2015, only six remain active: Airtel Payments Bank, Paytm Payments Bank, India Post Payments Bank, Fino Payments Bank, NSDL Payments Bank, and Jio Payments Bank.
- Recently, the RBI halted Paytm Payments Bank’s operations, barring it from accepting deposits or onboarding new customers.
Payments banks are urging the government to increase deposit limits and allow lending to the microfinance sector to strengthen their financial sustainability and broaden income avenues. If approved, these changes could significantly enhanc
