The future is “uncertain” for payments banks and the model aimed at deepening financial inclusion requires regulatory support in order to be effective, a report said Monday.
The report from economists at SBI comes days after Aditya Birla Payments Bank, of the handpicked licensees, reportedly decided to shut down from October 2019. Vodafone m-Pesa had also shut shop earlier this month.
“The future is uncertain, but in time business will expand and evolve, with the help of regulatory and Government support,” they said in the note.
The payments bank model “seems to have failed to achieve the stated objectives” with only four entities
becoming operational out of the 11 players licensed in 2014, it said.
The report said the payments banks face stringent regulations both on the asset and the liabilities side.
They are not allowed to lend, deposit acceptance is capped at Rs 1 lakh and the capital requirement is at a steep 15 per cent despite the business being free from credit risks.
The higher disclosure norms that oblige them to share their business plan with the regulator could prove to be “somewhat tricky” when the business model of the technology-intensive companies itself could be the biggest source of their competitive strength, it said.
As a result, the entities are working merely as an aggregator and there is no possibility for them to be a “real competitor” for the universal banks, it said.
The model, however, can be successful if they are given access to Aadhaar-based know your customer process which is at least thrice as cheaper than manual KYC and if RBI allows PBs to tie up with third-party services to cross-sell products, it said.
Arrangements with universal banks to automatically transfer funds in accounts exceeding Rs 1 lakh can also be of help, it said. PTI AA