Jio Payments, a bank of Reliance Industries and State Bank of India, India Post Payments Bank, Fino Payments Bank and Paytm Payments are still in business
Only four of the 11 payment banks that were given licences by Reserve Bank of India in August 2015 are operational. Jio Payments, a bank of Reliance Industries and State Bank of India, India Post Payments Bank, Fino Payments Bank and Paytm Payments are still in business.
Aditya Birla Payments Bank (ABPB), a venture between Idea Cellular and Aditya Birla Nuvo, announced shutting down its operations from October 18, 2019, saying that unanticipated developments in the business landscape that have made the economic model unviable.
This is not the first such development related to payment banks. On July 15, Vodafone m-Pesa had shut shop.
Aditya Birla Payments Bank that was only 18-month-old has asked its customers to transfer their balances before July 26. "We will be restricting any further credits (add money) to your account from July 26, 2019," it informed customers in a note. Full and complete arrangements have been made to return all the deposits," it said in a notice to the exchanges.
Aditya Birla Nuvo was granted "in principle" licence by RBI in August 2015. It was given 18 months to meet regulatory requirements and receive final licence to launch the payments bank. The central bank gave the final licences to seven out of the eleven payments banks.
In 2014, RBI conceptualised the payment model on the recommendation of Nachiket Mor committee for furthering financial inclusion by providing small savings accounts and payments and remittance services to unorganised sector entities. However, it seems to have failed to achieve the stated objectives as only four are operational out of the 11 licensed players. In 1990s also, RBI had made an attempt to create Local Area Banks (LABs) that are currently facing a host of issues, according to SBI Ecowrap.
"PBs currently face stringent regulations on both asset and liability side. On the asset side, PBs face a blanket ban on any type of lending. On the liability side too, they cannot accept deposits higher than Rs 1 lakh. Besides, capital requirement is quite steep at 15% capital to risk weighted assets ratio. Though the business of PBs is free from credit risk and faces relatively lower market risk, it is subject to operational and liquidity risk. PBs are turning out to be working merely as an aggregator - a disintermediation vehicle for depositors to invest in G-Secs. PBs emerging as a real competitor to banks is not a near-term possibility with deposits up to Rs 1 lakh comprising only 9% of total deposits of the banking system in terms of value (70% in terms of number of accounts)," SBI Ecowrap said.
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