Outlook for payments banks looks bleak after second consecutive year of losses

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Outlook for payments banks looks bleak after second consecutive year of losses

Payments banks are giving the Reserve Bank of India (RBI) and investors a lot of grief as they continue to report losses for a second consecutive year, with no signs of a turnaround any time soon.

These banks were launched to make citizens more financially inclusive, but they will first have to revive their own financial health. For FY18, the consolidated balance sheets of payments banks showed a net losses of Rs 516.5 crore. This is double the loss reported in the previous fiscal, which was Rs 242.2 crore, according to RBI data.

The central bank attributed these losses to high operating expenses as the companies tried to reach under-penetrated markets. “Large capital expenditure had to be undertaken for setting up initial infrastructure. It may take some time for payment banks to break even as they expand their customer base by offering unique banking products,” RBI reportedly said in its report.

In FY18, operating loss of payments banks was Rs 522.1 crore, significantly up from the previous fiscal’s Rs 240.7 crore. With commercial banks also pushing their technology initiatives, the outlook for payments banks still looks grim.

The banks have shown positives in other metrics. For example, their share of deposits rose to 9 percent from 5.7 percent during this period and net interest income too improved. Mobile wallets drove 81 percent of their transactions.

Some entities including the Paytm Payments Bank and Fino Payments Bank fell foul with RBI regulations last year as the central bank found lapses in their functioning during statutory audits. Both banks were barred from registering new customers for a long period last year, which impacted their business severely. Fino received permission to resume operations in October and Paytm Payments Bank was back in business in the last week of December.

Images are for reference only.Images gathered automatic from google.All rights on the images are with their original owners.

2019-01-04 05:43:22

Images are for reference only.Images gathered automatic from google.All rights on the images are with their original owners.

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