Payments banks seek higher deposit limit, urge FinMin to raise to Rs 5 lakh

Payments banks have urged the Union finance ministry to increase their deposit limit for each account to ₹5 lakh, according to a source who participated in a meeting, chaired by the Department of Financial Services Secretary M Nagaraju, in New Delhi. At present, they can accept deposits of up to ₹2 lakh. 

The previous increase was in April 2021, when the maximum end-of-day balance was raised from ₹1 lakh to ₹2 lakh. In addition to the deposit limit, such banks have asked for permission to lend to the microfinance sector, with a cap on loans, to diversify their income streams. 

If granted, this would mark a departure from the current licensing framework, which mandates that payments banks invest only in government securities. “The meeting reviewed the financial status of payments banks, and the government asked for a road map concerning financial inclusion,” added the source. The meeting also discussed licences for small finance banks (SFBs). According to guidelines, payments banks are allowed to apply for conversion into an SFB after five years of operations and meeting other requirements set by the Reserve Bank of India (RBI). One key requirement is a minimum paidup voting equity capital or net worth of ₹200 crore. Last year, Fino Payments Bank applied for an SFB licence. 

Payments banks such as Jio Payments Bank, Airtel Payments Bank, Fino Payments Bank, NSDL Payments Bank, India Post Payments Bank, and Paytm Payments Bank attended the meeting along with officials of the Reserve Bank of India. 

Another source said the financial services secretary praised India Post Payments Bank’s (IPPB’s) efforts in financial inclusion and door-step banking, and has urged others to push more into it. IPPB, a state-owned payments bank, operates 650 branches and more than 163,000 access points across the country. IPPB offers services and products such as savings and current accounts, virtual debit cards, domestic money transfer services, bill and utility payments, insurance services for its customers, and child enrolment services for children aged five and below. 

In August 2015, the RBI granted licences to 11 payments banks, but five surrendered them before starting operations, leaving only six players in the field: Airtel Payments Bank, Paytm Payments Bank, India Post Payments Bank, Fino Payments Bank, NSDL Payments Bank, and Jio Payments Bank. Recently, the RBI stopped Paytm Payments Bank from accepting deposits and adding customers, effectively shutting down its operations. 

On agenda 

To diversify income streams, payment banks are seeking permission to lend to the microfinance sector with a loan amount cap 

If granted, it would mark a departure from making payment banks invest their funds only in G-Secs 

Issue of licences for small finance banks was taken up as well