To promote digital payments banks, the Reserve Bank of India (RBI) has raised the maximum balance that can be held with a payments bank to Rs2 lakh from Rs1 lakh.
"The extant 'guidelines for licensing of payments banks' issued on 27 November 2014 allow payments banks to hold a maximum balance of Rs1 lakh per individual customer. Based on a review of performance of payments banks and with a view to encourage their efforts for financial inclusion and to expand their ability to cater to the needs of their customers, including micro, medium and small enterprises (MSMEs), small traders and merchants, it has been decided to enhance the limit of maximum balance at end of the day from Rs1 lakh to Rs2 lakh per individual customer. A circular in this regard shall be issued separately," the central bank says in a statement.
On Wednesday, RBI governor Shaktikanta Das had "With a view to furthering financial inclusion and to expand the ability of payments banks to cater to the growing needs of their customers, the current limit on maximum end of day balance of Rs1 lakh per individual customer is being increased to Rs2 lakh with immediate effect”.
Subsequently the RBI has now issued a notification to that effect. “Considering the progress made by payment banks in furthering financial inclusion and with the objective of giving more flexibility to the payment banks, RBI has decided to increase the limit for maximum balance to Rs2 lakh.
Payments banks currently operational in India are Paytm Payments Bank, India Post Payments Bank, Airtel Payments Bank, Fino Payments Bank, Jio Payments Bank and NSDL (National Securities Depository Ltd) Payments Bank. Payment banks are not allowed to give out loans.
Earlier, four payments banks, Sun Pharma, Cholamandalam, Tech Mahindra and Aditya Birla Payments Bank bowed out from the business.
Typically, the main source of revenues for payments banks is either via their deposits in government securities (G-Secs) and small commercial banks or via the merchant discount rate (MDR). The MDR is the fee charged to a merchant for taking payment from their customers through wallets, debit or credit cards, or the unified payments interface (UPI).
Payment banks were started in India to increase financial inclusion. They look to provide small savings accounts, payments and remittance services to migrant labour workforce, low-income households, small businesses, other un-organised sector entities and other users. These banks cannot accept fixed deposits or recurring deposits and are not allowed to give any form of loan or issue a credit card, which is also a form of unsecured personal loan.
RBI has also extended the national electronic funds transfer (NEFT) and real-time gross settlement (RTGS) facilities to digital payments intermediaries. Till now, only banks could use RTGS and NEFT payments facility.
The RBI in its monetary policy announcements increased the ambit of the RTGS and NEFT payment modes to non-bank entities payment space including prepaid payment instrument (PPI) issuers, card networks, white label ATM (WLA) operators, trade receivables discounting system (TReDS) platforms). Non-bank payment system operators include Amazon Pay, Paytm, PhonePe, MobiKwik, PayU and Ola Pay.
This will enable the users of these services to transfer funds via RTGS and NEFT modes. The membership to the RBI-operated centralised payment systems (CPSs) – RTGS and NEFT – till now were limited to banks, with a few exceptions like clearing corporations and select development financial institutions.
Both these moves are likely to minimise the settlement risk in the financial system and enhance the reach of digital financial services.