India Post Payments Bank wants RBI to relax lending rules, says top official

IPPB

India Post Payments Bank is hoping that the Reserve Bank of India will ease restrictions on lending as it seeks to widen its presence and double revenue, a top executive said.

"We are hoping that some relaxation in the rules of lending for payment banks will come in some time. Probably the current model of payment banks will be upgraded," J. Venkatramu, managing director of India Post Payments Bank, said in an interview with Moneycontrol.

According to RBI guidelines, payment banks are not permitted to lend to any person, including their directors. However, they may advance loans to employees from their own funds, as per board-approved policy outlining the caps on such loans.

"We keep giving our suggestions report on lending-related flexibilities for us to the RBI. They have their own constraints," Venkatramu added.

The RBI issued payment bank licences to 11 entities from 2016 to 2017. 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.

Earlier, Rishi Gupta, managing director of Fino Payments Bank, told Moneycontrol that the RBI must think of allowing payment banks to advance small loans to borrowers from their own books.

“If small, micro-lending is allowed, payment banks will become a better, full-fledged model without the requirement of conversion to an SFB (small finance bank),” Gupta said.

Diversifying portfolios

India Post Payments Bank has formed tie-ups with Axis Bank and LIC Housing Finance to widen its outreach.

"We are trying to diversify… Whatever we have not been able to provide, we will go through the third party. We have tied up with banks. We have also tied up with five insurance services providers, both general and life," said Venkatramu.

For life insurance, India Post Payments Bank has tied up with HDFC Life Insurance, SBI Life Insurance and Bajaj Allianz Life Insurance. For general insurance, it has partnerships with TATA AIG General Insurance and Bajaj Allianz General Insurance.

India Post Payments Bank plans to enter the mutual fund business through a third party.

"MF has good business scope. We will look into this too in the future through third parties," said Venkatramu.

The payment bank is also finalising tie-ups with state-owned Bank of India and Bank of Maharashtra, Venkatramu said.

Report card

Established in 2018, India Post Payments Bank has 60 million customer accounts, of which 20 percent are inactive. The payment bank is leveraging India Post’s network of 158,000 outlets.

India Post Payments Bank reported its first operational profit of Rs 20.16 crore in FY23. The bank’s revenue increased 66 percent and operating costs climbed 17.4 percent, it said in a statement on August 22.

Venkatramu said India Post Payments Bank plans to double its income this year from Rs 760 crore in FY23.