Paytm Payments Bank has reportedly approached the Reserve Bank of India (RBI), seeking in-principle approval for becoming a small finance bank (SFB), which will enable it to extend loans. According to the Times of India report, the approval from RBI would allow Paytm to lay the groundwork for the scheme, so that it would not have to wait longer after it completes the mandatory five-year waiting period in a couple of years.
“One of the conditions for granting licence as a payments bank was that we have five years experience in the payments space. I have written to the RBI asking for an in-principle approval so that we will be prepared to apply for the final license when we are eligible,” Paytm Payments Bank CEO Satish Kumar Gupta told TOI.
A Payments Bank can accept deposits of up to INR 1 lakh ($1,433), offer remittance services, mobile payments or transfers or purchases and other banking services like ATM/debit cards, net banking and third-party fund transfers but cannot advance loans or issue credit cards.
Last year, the RBI said that payments banks could seek conversion to SFBs. Unlike payments banks, SFBs can also grant loans. The Paytm Payments Bank competes with Airtel Payments Bank and Jio Payments Bank, among others.
The Paytm Payments Bank has been in operation since 2017 and offers features such as zero charges on online transactions, no minimum balance requirement and a free virtual debit card. The company claims that the Paytm Payments Bank was launched to further financial inclusion in the country.
Gupta claims that the payments bank saw growth in August, as customers preferred to make digital payments through the contactless QR method, amid the Covid-19 pandemic. He claims that the bank processes more than INR 55,000 Cr in transactions every month. In June, it was reported that the Vijay Shekhar Sharma-led One 97 Communications’ payments bank, Paytm Payments Bank (PPBL) had seen the second year of profits. The company said its profit had grown 55% from INR 19.2 Cr in FY19 to INR 29.8 Cr in FY20. The company attributed the growth to higher customer acquisition in smaller cities and towns to drive financial inclusion in the country. The annual revenue had crossed INR 2,100 Cr.
Further, the company claimed that Paytm Payments Bank had facilitated more than 485 Cr transactions worth INR 4.6 Lakh Cr. It said that the domestic money transfers had accounted for INR 29K Cr, a significant growth from the last fiscal year.
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