Payments banks find tough to get deposits into bank accounts

The payments banks are crucial part of the Narendra Modi-led National Democratic Alliance ( NDA) government's push to broaden access to finance in a country where probably half the adult population still does not have an active bank account. Banking experts are of the view that these banks will make it easier for poorer citizens to pay bills, transfer money to their relatives, buy insurance and even save for their retirement.

Nearly a year after it was launched, the payment banks have struggled to draw depositors. The four functional pay- ment banks, including Airtel Payments Bank Ltd., Fino Payments Bank Ltd., India Post Payments Bank and PayTM Payments Bank Ltd., had outstanding demand deposits worth Rs 236.45 crore as on September 30, BloombergQuints reports citing Reserve Bank of India (RBI) data received in response to an RTI application. Demand deposits refer to money in savings and current accounts.

The publication added that Airtel Payments Bank had the highest number of deposits with Rs 224.03 crore growing 26 per cent from Rs 177.05 crore in August. At the end of FY17, Airtel had total deposits of Rs 68.33 crore. The report added that Fino held Rs 6.8 crore while Paytm Payments Bank held deposits of Rs 3.5 crore as on September 30.

India Post Payments received its final license to start operations in January this year. According to the data provided by RBI, it was able to garner deposits worth Rs 72 lakh, as on September 30.

In 2015, the RBI handed over permits to a handful of entities to start payments banks to bring financial services within the reach of millions of Indians who lack access to formal banking. Payments banks are allowed to accept deposits and remittances, but they cannot lend. These banks are expected to increase competition in the sector by offering higher interest rates on deposits.

The ability to hold deposits and pay interest on them is one of the key differentiators between payments banks and mobile wallet companies. Airtel launched operations offering an interest rate of 7.5 per cent - the highest demand deposit rate in India. India Post Payments Bank offers between 4.5- 5.5 per cent, while Paytm Payment Bank offers 4 per cent.

As of now, Airtel, Fino and PayTM all have opted for differing strategies for their bank operations. Airtel is offering customers an interest of 7.5 per cent on deposits, the highest even among commercial banks.