The Reserve Bank of India (RBI) must now think of allowing Payments Banks to advance small loans to borrowers from their own books, Fino Payments Bank Managing Director Rishi Gupta says.
Gupta was speaking to Moneycontrol on June 30 in the context of RBI guidelines that do now allow Payments Banks to give loans; they are allowed to accept deposits of up to Rs. 2 lakh.
“If small, micro lending is allowed, Payments Banks will become a better, full-fledged model without requirement of conversion to an SFB (Small Finance Bank). It has been seven years since RBI issued guidelines in 2015,” Gupta said.
Payments Banks are required to be licensed as small finance banks for them to give loans, access more deposits and boost their profitability
“Today we have more data points, information reports by credit bureaus, KYC (Know Your Customer) improvements have happened…it may be good if RBI can review the Payments Bank guidelines and within the framework, if they give more freedom, it will become more better,” Gupta said.
The RBI issued Payments Bank licenses to 11 entities between 2016 and 2017. Of those, only six are operating at present: Airtel Payments Bank, Paytm Payments Bank, India Post Payments Bank, Fino Payments Bank, NSDL Payments Bank and Jio Payments Bank.
Asked how many of the Payments Banks will survive in the next 5 years, Gupta said most will because initial hiccups associated with the model had been addressed. But the RBI is unlikely to issue any more Payments Bank licenses, Gupta said.
“I do not think RBI will issue any more Payments Bank license…I think the path with will be SFB and then conversion into a universal bank,” Gupta said.
Fino Payments Bank is presently engaged in completing formalities related to applying for a reverser merger with holding company Fino Paytech, following which the SFB option can be explored, he said.
“We want to test the waters first by doing partnerships and then moving in the space of lending. The SFB gives us many opportunities in terms of liabilities also. People only look at credit- side advantages, but on liabilities side also I presently face restriction of Rs. 2 lakh,” he said.
Business outlook
Fino Payments Bank aims to open 250,000 new deposit accounts each month which will give it a significant opportunity for cross-selling products, said Chief Financial Officer Ketan Merchant.
As on March end, Fino Payments Bank had a total base of 4.59 million low-cost current account and savings account (CASA) deposits, up from 2.57 million last fiscal.
The bank, which reported revenue of Rs. 1,009 croe in FY22, will post upwards of 25 per cent year-on-year growth in revenue for the current fiscal as well, Gupta said.
“Out of a million merchants, nearly 350,000 merchants came last year (FY22). If we maintain the same rate, another million merchants will come in next 3 years. Our UPI (Unified Payments Interface) transaction share was 10% in overall transaction volumes and this year it will cross more than 20%,” he added.
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