Indian central bank to address concerns of payments banks soon

Reserve Bank of India governor Shaktikanta Das said on Monday he will be meeting heads of payments banks this week to understand their concerns.

The central bank had given licences to 11 payments bank as of August 2015, of which seven are currently operational. These include Airtel Payments Bank, Jio Payments Bank and Paytm Payments Bank.

Speaking at the NITI Aayog’s FinTech Conclave 2019, Das said that banks no longer have a monopoly over payment services.

“Affordability, interoperability, customer awareness and protection have also been other focus areas. Banks have been the traditional gateway to payment services. However, with the fast pace of technological changes, this domain is no longer the monopoly of banks. Non-banking entities are cooperating as well as competing with banks, either as technology service providers to banks, or by directly providing retail electronic payment services.”

RBI’s recent trends and progress report has found that the consolidated balance sheets for the operational payments banks showed net losses of Rs 516.5 crore for the fiscal year 2018, almost double that of the fiscal year 2017 when they lost Rs 242.2 crore. The losses were attributed to high operating expenses.

In June last year, post and audit, the RBI had found lapses in the KYC process employed by Paytm Payments Bank. It raised concerns around the sharing of financial data of Indian users between One97 Communications, a majority foreign owned firm, and Paytm Payments Bank. Paytm Payments Bank was then asked to halt on-boarding of new customers. It resumed the process for signing up new customers after receiving the green flag from RBI.

Similarly, it imposed a fine of Rs 1 crore on Fino Payments Bank for violating the direction to stop opening new accounts, when it found a few accounts held more than the allowed minimum balance of Rs 100,000.

Das said the setting up of a regulatory sandbox (similar to a special economic zone) can help address associated risks, while keeping in mind the growth requirements of the sector. A sandbox approach will allow players to experiment before finally adopting a technology or system.

According to Das, the ‘regulatory sandbox’ will benefit fintech companies by way of reduced time to launch innovative products at a lower cost. The RBI will issue guidelines for the same in the next two months.