The financial health of ‘payments banks’, a concept championed by the Reserve Bank of India (RBI) to further the cause of financial inclusion in the country, has set the alarm bells ringing.

According to the latest data released by the banking regulator, the consolidated net loss of all the payments banks (PBs) in the country has more than doubled to ₹516 crore from ₹242 crore in the previous fiscal. In FY17, only two PBs had reported their financials, while the FY18 data are for five players.

The losses have been attributed to the high operating expenses, as many of these banks had to set up the initial infrastructure. The expenses have gone up by five times as they have to go deeper in a bid to tap the unbanked customer.

The RBI data for FY18 also reveal that the net interest income of the payments banks have increased to ₹151 crore as against ₹30 crore in the year-ago period. However, the total income has gone up by eight times to ₹1,178 crore in FY 18. Deposits have also risen six times at ₹438 crore during the period.

‘Trend may persist’

However, banking experts feel that the losses will continue for another couple of years as these are initial years of operations and many PBs have not even completed a full financial year. Besides, the segment has been plagued by regulatory issues. In 2017, Airtel Payments Bank, which was the first to start operations and is the largest player at present, was barred by the RBI from adding new customers for violating certain KYC norms.

“It is too early to comment on the financial health of the PBs as it is still a new concept for many. It has been a mixed period for these banks as many of them are still in their learning and evolution period. It is not a bad start at all despite the challenges, and we will get a clearer picture by FY20,” said Naveen Surya, Chairman Emeritus of Payment Council of India and a Fintech expert.

Surya further added that while the primary objective of the PBs was to harness technology to increase the financial access of customers at the bottom of the pyramid, not many in the segment are aware of financial technology and such initiatives will take time to show results.

While about 41 entities had applied for PB licence in 2014 after the RBI, under Raghuram Rajan, released the draft guidelines, only 11 got licence.

Of the 11, six PBs — Aditya Birla Payments Bank, Airtel Payments Bank, India Post Payments Bank, Fino Payments Bank, Jio Payments Bank and Paytm Payments Bank — have launched operations.

Meanwhile, the small finance banks, which were converted to full-fledged scheduled banks from their earlier avatar as micro finance institutions, slipped into the red in FY18 from posting a small profit last year.

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