The Reserve Bank of India (RBI) decision to set up payments banks are expected to increase the usage of banking accounts by reaching out to the depositors in a significant way, says rating firm ICRA.
The agency said that given the relatively moderate level of financial penetration, specifically in rural & sub-urban areas, and limited number of payment points of commercial banks in relation to large number of saving deposit accounts and population, expected to provide adequate growth opportunities to payments banks.
While large number of accounts opened under PMJDY scheme have lowered the potential for Payments Banks, these banks are expected to improve last mile connectivity, penetration of payments points in a significant way, it said.
Commenting on the threat for full fledge commercial banks, the agency said that these licenses could intensify competition in low income space, but it is not likely to impact the deposits profile of full fledge commercial banks in a significant way given the restriction on maximum deposit per customer (Rs 1 lac). Besides, unlike some private sector banks, Payments Banks would not be able to offer higher interest on saving deposits given their thin interest spreads.
As far as business viability of payments banks are concerned, profitability metrics for these banks will depend upon scalability and ability to maintain lower operating cost to serve customers. As Payments Banks are not allowed to undertake lending activities, they are allowed to maintain higher leverage (maximum 33.33 times). This may help Payments Banks achieve reasonable return on equity.