Payments banks (PBs) continue to face challenges. They registered a combined net loss in FY19, though their deposit base more than doubled.

According to data available with the Reserve Bank of India (RBI), the combined net loss of all the seven PBs was ₹626.8 crore in FY19, against a combined net loss of ₹515.6 crore for five PBs in FY18. However, the total deposits rose to ₹883 crore in FY19 for the seven banks, against ₹438 crore for five banks in FY18.

“Despite an improvement in net interest income and non-interest income, increases in operating expenses resulted in the overall negative profits for payments banks in 2018-19,” said the RBI’s ‘Report on Trend and Progress in Banking in India in 2018-19’.

The limited operational space available to them, and the large initial costs involved in setting up the infrastructure, imply that it may take time for PBs to break even as they expand their customer base, the report noted. “The evolution of PBs since their inception suggests that they are yet to achieve the optimal scale to break even or attain profitability,” it said.

The report further said the PBs’ net interest margin (NIM) and efficiency (cost-to income) improved during the year, even as they continued to see losses as reflected in RoA, RoE and profit margins.

In FY19, their net interest income grew 44.8 per cent to ₹219.4 crore, from ₹151.5 crore a year ago.

The active PBs today include Airtel Payments Bank, India Post Payments Bank, Jio Payments Bank, Paytm Payments Bank and NSDL Payments Banks. Aditya Birla Payments Bank decided to close down operations earlier this year, raising questions about the profitability of such institutions.

Conceptualised by the RBI in 2014, the deposit collection for PBs is capped at ₹1 lakh per customer; they are not allowed to lend. The banks have to maintain a minimum capital adequacy ratio of 15 per cent of their risk weighted assets on a continuous basis.