Paytm, Airtel, Jio, other payment banks’ deposits double within a year; but, losses widen too

While the deposits collected by payments banks such as Paytm, Airtel, Jio Payments Bank doubled in the last financial year, the losses have mounted for the third year in a row with the rise of operating costs. “The consolidated balance sheet of PBs expanded in 2018-19 as their deposits more than doubled during the year,” RBI said in a report recently. Deposits soared to nearly Rs 883 crore in the FY19 as compared to Rs 438 crore in the last fiscal, the Reserve Bank of India said in the report titled Trend and Progress of Banking in India for 2018-19. On the other hand, consolidated losses of all payments banks jumped to Rs 626.8 crore in FY19 from Rs 515.6 crore a year ago.

The losses have widened because operating expenses of payments banks swelled even as their net interest income and non-interest income improved. “The limited operational space available to them and the large initial costs involved in setting up of the infrastructure imply that it may take time for payments banks to break even as they expand their customer base,” the report said. Meanwhile, the number of payments banks has also increased in the country from five in 2017-18 to seven in 2018-19.

The Indian government had introduced payments banks to improve financial inclusion by leveraging technology services and increasing mobile penetration. These banks cannot lend their functionality is restricted to receive cash payments from customers, store money in a digital wallet, and allow customers to pay for goods and services from the wallet. This also means that those who are unable to physically access formal bank branches can also use services of a bank. However, payment banks have to pay interest on the deposits collected and unlike regular banks which earn their revenue from lending as well, payment banks only get revenues from fees on processing payments for customers.