Payments banks can now also offer other banking services like debit cards and mobile banking. This will help them approach small merchants who have a monthly turnover of Rs1-2 lakh.
However, according to financial experts, this will not have any significant on their business because the increase allowed in the deposit limit is very less.
Gaurav Gupta, founder and CEO, MyLoanCare said, “Given that it is a new category, and these banks are in a process of growth, RBI is being cautious to allow them to access a large amount of depositors money in one go.”
“The payments banks deposit limit is not linked to Deposit Insurance and Credit Guarantee Corporation (DICGC) coverage. It has been fixed by RBI based on their comfort with the financial stability of payments banks. So, till date payments banks can take ₹1 lakh per depositor and the same is covered under the insurance scheme of DICGC with a limit of ₹5 lakh. From today, payment banks can take ₹2 lakh per depositor, which will still be covered under DICGC coverage of ₹5 lakh,” he said.
All banks are compulsorily required to pay a premium to DICGC to avail insurance coverage for their depositors. Payments banks will now be required to pay higher premium.
Adhil Shetty, CEO, Bankbazaar.com said, as payments banks are not allowed to lend, the main source of revenue for them remains their deposits in government securities (G-Secs) and small commercial banks or via the Merchant Discount Rate or MDR. The MDR is the fee charged to a merchant for taking payment from their customers through wallets, debit or credit cards, or UPI.
“With the deposit threshold going up, people will be able to park more funds with the Payments banks, especially as term deposits, as well as transact more and for higher values. As the transactions via the payment bank accounts increase, the revenue they generate can also go up,” said Shetty.
Safe but low interest rates
Paytm Payments Bank, Indian Post Payments Bank, Airtel Payments Bank, Fino Payments Bank, Jio Payments Bank and National Securities Depository Limited, (NSDL) Payments Bank are among the players in this segment,
In the past, given the stiff competition, four payments banks have exit the business. These were Sun Pharma, Cholamandalam, Tech Mahindra and Aditya Birla payments bank.
Initially, payments banks had offered higher interest rates on customer deposits but now, these have come down drastically.
Also, their financial stability cannot be considered on a par with established public and private sector banks.
However, when it comes to making deposits, tpayments banks are considered safe options. Shetty said, “The deposits are covered under the credit guarantee scheme. As per RBI guidelines, 75% of their funds have to be invested in G-secs. Taken together, this makes payment banks a safe alternative.”
Moreover, RBI has already put a limit on deposits and have not allowed payments banks to lend money. This way, payments banks can only operate in a limited manner, that is, getting deposits, make remittance, fund transfers, utility payments, etc., thereby making a safer place for customers to park their money.
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