Payments banks may seek RBI nod for small-value fixed deposits
- Payments banks (PBs) may approach the Reserve Bank of India (RBI) to allow them to take small-value fixed as well as recurring deposits
Key Highlights
- Garnering low-cost savings bank (SB) deposits is proving an uphill task given the high-interest rates being offered by commercial banks on term deposits
- Now, only six PBs — Airtel Payments Bank, Fino Payments Bank, India Post Payments Bank, Jio Payments Bank, NSDL Payments Bank, and Paytm PB — are operational.
FD/RD needed to stop deposit outflow
- “Commercial banks" low-cost CASA (current account, savings account) deposits have come down over the last few quarters
- As customers prefer investment in fixed deposits, non-convertible debentures, mutual funds, equities, etc.,
- Which offer better returns. Given this situation, there is no way PBs can stop the decline in their savings bank (SB) deposits.
- So, the only way to stop deposit outflow is to allow to offer FDs and recurring deposits (RDs)
Up the cap
- These banks can only accept demand deposits (current account and savings bank account/CASA) with a maximum balance of ₹2 lakh per individual customer.
- They cannot undertake lending activities but distribute financial products like mutual fund units and insurance products, etc,
- And act as business correspondents of another bank.
Prelims Takeaway
- current account and savings bank account
- Payments banks