Hike in deposit limit: Payment banks likely to attract bigger clients | Business Standard News

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Industry sources said banks had made a case for increasing the limit to Rs 5 lakh in line with the hike in deposit insurance cover

According to an RBI reportfor 2019-2020, the consolidated balance sheet of payments banks showed losses because of high operating expenses.

The RBI’s decision to double the maximum balance per day for each individual customer at payment banks to Rs 2 lakh will enhance such firms’ ability to attract bigger customers like MSMEs and small traders and merchants and enhance the viability of the business, said experts.

The average balance per account may not rise drastically, but the ability to get clients with higher turnover especially from those owning retail space would grow, said a senior executive with Mumbai-based payment bank. The RBI on Wednesday said the limit of maximum balance has been raised based on a review of payments banks’ performance. At present, six banks operate in this space — the most prominent of them being Airtel Payments Bank, Jio Payments, and Fino Payments Bank.

Industry sources said banks had made a case for increasing the limit to Rs 5 lakh in line with the hike in deposit insurance cover. The higher quantum of money available for deployment can help them scale and perhaps better the performance.

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Karthik Srinivasan, group head, financial sector ratings, ICRA, said the move is positive as the float available with banks will increase. A higher limit (up to Rs 5 lakh) would have improved it significantly. A review of avenues for deployment of money with payments bank is required, he added.

According to an RBI reportfor 2019-2020, the consolidated balance sheet of payments banks showed losses because of high operating expenses. The balance sheet of PBs increased in 2019-20 on a hefty increase in deposits with their share in liabilities more than doubling to 27.4 per cent from 12.3 per cent in 2018-19, despite the cap of Rs 1 lakh per account that was prevalent then.

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