Payments Banks want the RBI to increase its maximum end-of-day deposit balance to £ 5


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Paying Banks (PB) want India Reserve Bank (RBI) to increase the maximum end-of-day balance that a client can maintain with them from Rs 2 to Rs 5 million in line with the increase in deposit insurance coverage.

PB executives believe that an increase in the above limit will be possible given that the Deposit Insurance and Loan Guarantee Corporation (DICGC) has increased its deposit insurance coverage five times to Rs 5 crore.

DICGC provides bank deposits such as savings, fixed, current and occasional.

Previously, according to the PB Licensing Guidelines, published on November 27, 2014, these banks were able to hold a maximum daily balance of 1 lakh per client. This was in line with the coverage of 1 million rupees for deposit insurance at the time.

Although the deposit insurance coverage was raised to Rs 5 crore, with effect from 4 February 2020, the maximum balance a client can hold in a bank account at the end of the day has not increased proportionately.

RBI doubled the maximum balance that a customer can keep at the end of the day in PB to 2 lakh on April 8, 2021.

Micro, small and medium enterprises (MSMEs), small traders and traders can benefit if the maximum balance at the end of the day per user increases to Rs 5 crore as cash flow management will become better, a senior PB official said.

Furthermore, this can also increase the sum of cheap current savings accounts (CASA).

“This is the right time to revise the maximum daily deposit limit upwards given the changing economic scenario. This will also be in line with the increase in the deposit insurance limit, ”said the PB chief.

In a statement dated April 7, 2021, RBI Governor Shaktikanta Das said that based on a review of the performance of payment banks and aimed at encouraging their financial inclusion efforts and expanding their capacity to meet the needs of its clients, including MSMEs, small traders and merchants , it was decided to increase the limit of the maximum balance at the end of the day from 1 lakh to 2 lakh per individual customer.

Currently, if a client’s deposit with a PB at the end of the day exceeds 2 lighter Rs, the automatic clearing arrangement allows the PB to open a fixed deposit on behalf of the client with a partner bank (usually a small financial bank or private sector bank).

For example, Fino Payments Bank and Paytm Payments Bank have partnerships with Suryoday Small Finance Bank and IndusInd Bank, respectively.

PBs are niche banks that use technology for financial inclusion and are targeted at small businesses and low-income households.

According to the RBI guidelines, the primary objective of establishing a PB is further financial involvement by providing (i) small savings accounts and (ii) payment / remittance services for migrant workers, low-income households, small businesses, other non-organized sector entities and other beneficiaries. , by enabling large small value transactions in deposits and remittance services in a technology-driven secure environment.

As the business model is emerging and requires high overhead costs, especially in the beginning, most of these banks are yet to become profitable, according to the 2019-20 India Banking Trends and Progress Report.

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