India’s payments banks are pushing strongly to increase their operational capacity by requesting the Union Finance Ministry to increase the limit of deposits per account from ₹2 lakh to ₹5 lakh. The appeal was made in a recent meeting conducted by M Nagaraju, Department of Financial Services Secretary, in New Delhi. The step is intended to grant payments banks more flexibility to serve their customers in a better manner.
This is a recent attempt by payments banks to obtain regulatory modifications that will support their growth. The last hike in the deposit limit came in April 2021 when the Reserve Bank of India (RBI) increased the upper end-of-day balance from ₹1 lakh to ₹2 lakh. Payments banks believe that increasing the deposit ceiling will not just increase customer confidence but also enable them to compete better with traditional banks.
The conclave also debated the payments bank’s financial status and the possible measures for achieving financial inclusion from various sections of society. The government was interested in exploring how payments banks can better align with this process. Conversations went on regarding an option where the payments banks were to be considered for SFB licenses after being operational for five years, under the condition of complying with any regulations set up by the RBI. Particularly, Fino Payments Bank already made the move to seek an SFB license, marking the trend of payments banks aspiring to diversify services.
Senior executives from major payment banks, Jio Payments Bank, Airtel Payments Bank, Fino Payments Bank, NSDL Payments Bank, India Post Payments Bank, and Paytm Payments Bank were present during the meeting in addition to RBI officials. M Nagaraju, further appreciated the efforts of India Post Payments Bank (IPPB) towards making the country financially included and conducting door-step banking. IPPB has 650 branches and more than 163,000 points of access spread across the country, offering life-enabling products like savings bank accounts, virtual debit cards, domestic money remittances, bill payments, insurance, and child enrollment solutions for young ones.
The call for an increased deposit limit and lending authorizations is a sign of the changing nature of India’s financial ecosystem. As payments banks try to play more meaningful roles in this ecosystem. By broadening their capabilities and diversifying their services, payments banks hope to serve underserved segments better and contribute to India’s overall economic development.
Overall, these reforms can be a revolutionary move for payments banks in India and improve their operational systems as well as their role in the financial industry.
