Payments banks are planning to request the Reserve Bank of India (RBI) to allow them to enterprise into micro lending. This might be a reiteration of the same request made final yr, sources informed FE. The trade intends to method the regulator beneath the aegis of the Payments Council of India (PCI) and request it to let funds banks with a sure monitor report to provide out loans as much asRs 1 lakh. Under the present framework, funds banks are barred from endeavor any sort of lending. They are allowed to simply accept demand deposits with balances as much as Rs 2 lakh and cross-sell different monetary merchandise.
“We are seeking permission to give micro loans only to individuals. The RBI’s concerns around lending by conglomerates having non-financial businesses has to do with connected lending. Those concerns don’t arise when it comes to micro lending,” stated an individual conscious of the plan.An electronic mail despatched to the PCI in search of feedback for this story remained unanswered until the time of going to press.Of the 5 main licence holders of funds banks, Airtel Payments Bank and Jio Payments Bank are owned by conglomerates with pursuits in non-financial companies.
The funds financial institution mannequin has been hamstrung by the non-remunerative nature of cost transactions in India. In a report earlier this yr, Moody’s Investors Service stated that dominance in funds doesn’t essentially translate into aggressive benefits that may be prolonged to different monetary providers. The cause for that is that Unified Payments Interface (UPI), the first community for digital transactions in India, has an open structure that ranges the enjoying area for all firms, analysts at Moody’s stated.
For occasion, Paytm Payments Bank, even after three years of operations, had a deposit market share of lower than 0.1% as of March 2021. “Its market share in wealth management products, such as insurance and mutual funds, is similarly minimal. By contrast, banks have increased their market share in the sale of third party products such as life insurance in the past five years,” the report stated.
While the RBI has allowed funds banks with 5 years of operations behind them to hunt permission for conversion to small finance banks, not one of the present gamers are recognized to have moved in that course but.
According to the RBI’s December 2021 report on the development and progress of banking in India, funds banks’ stability sheet expanded 49% in FY21, on prime of a development of 17.5% in FY20. The share of deposits in whole liabilities elevated to 36.8% from 27.4% a yr in the past.
Since funds banks are nonetheless in a nascent stage of growth, they’re incurring in depth funding prices for growing fundamental infrastructure, the central financial institution stated. “Moreover, their customer base is yet to develop fully, making break-even challenging. As a result, since inception, they have been suffering losses. The same trend held in 2020-21, despite improvement in their non-interest income,” the development and progress report stated.
Source: www.financialexpress.com”