tempting, but prone to disaster. this is again the talk of the financial town. a new bank that offers lucrative 7.25% interest on savings accounts held by them. this puts into question all financial prudence where rates are driven by sustainability, not just to attract more and more users, as is the case with start-ups that themselves are in the midst of uncertainty.
payment bank concept has been approved by rbi, which has imposed some restrictions on their operations. while these banks need to maintain crr similar to scheduled commercial banks, they also need to hold 75% of their demand deposit balances in government securities for maintaining statutory liquidity ratio.
the question is, how will these newly conceptualised entities run their operations, with viability, in a way that they honour their interest commitments to account holders?
payment banks cannot lend in the market, nor can they issue credit cards. this simply means that an area of genuine profit-making has been plugged by the rbi. this also means that transaction fee on remittances will be the only way of earning revenue, besides some investments in commercial banks or government securities.
agreed, india needs financial inclusion, as will come with another concept of ‘small banks’ (which can lend to small businesses and individuals), but not by placing financial and business prudence at stake.
this isn’t a start-up landscape where number of users or transactions may ultimately reverse imprudent burning of cash. this is banking, a pure business. and with the coming up of upi apps and bhim, going away of mdr, any expectation from transaction costs to cover up interest liabilities is nothing but a fool’s paradise.
now either the rbi must rethink the entire payment banks concept, or payment banks take suo-motu cognizance of circumstances and refrain from stepping into an uncertain, highly risky path.
give your verdict: