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Payments Bank may ask RBI to let them lend
July 04, 2022
The industry intends to approach the regulator under the aegis of the Payments Council of India (PCI) and request it to let payments banks with a certain track record give out loans up to ₹1 lakh. Under the current framework, payments banks are barred from undertaking any kind of lending. They are allowed to accept demand deposits with balances up to ₹2 lakh and cross-sell other financial products.
“We are seeking permission to give micro-loans only to individuals. The RBI’s concerns around lending by conglomerates having non-financial businesses have to do with connected lending. Those concerns don’t arise when it comes to micro-lending,” said a person aware of the plan.
An email sent to the PCI seeking comments for this story remained unanswered till the time of going to press. Of the five major license holders of payments banks, Airtel Payments Bank and Jio Payments Bank are owned by conglomerates with interests in non-financial businesses.
The payments bank model has been hamstrung by the non-remunerative nature of payment transactions in India. In a report earlier this year, Moody’s Investors Service said that dominance in payments does not necessarily translate into competitive advantages that can be extended to other financial services. The reason for this is that Unified Payments Interface (UPI), the primary network for digital transactions in India, has an open architecture that levels the playing field for all companies, analysts at Moody’s said.
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