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RBI needs to constitute a committee to look into the future of Payments Banks

Photo showing an Airtel board atop a shop

(with inputs from Nikhil Pahwa) The RBI announced on Thursday that it would not issue licenses to payments banks 'on-tap' until those companies that were granted licences in the past 3-4 years had stabilised. In its guidelines for the licensing of payments banks and small finance banks, issued in November 2014, the central bank had said then that "after gaining experience in dealing with these banks", it would  consider granting licences ‘on tap’ - meaning that it would accept applications and grant licences throughout the year. "It has also been decided that more time is needed to review the performance of Payments Banks before considering the licensing of this category of banks to be put ‘on tap’." The RBI issued payments bank licenses to 11 entities in August 2015, and there are 7 payments banks currently operating in India. They are: Aditya Birla Payments Bank Airtel Payments Bank India Post Payments Bank Fino Payments Bank Jio Payments Bank Paytm Payments Bank NSDL Payments Bank Why did the RBI postpone on-tap licenses for payments banks? One likely reason is that payments banks have been recording losses for some time now. In January, the RBI said in a report that payments banks had recorded losses for two successive years. The consolidated balance sheets of payments banks showed net losses of Rs 516.5 crore in FY17-18, almost double from the previous year, when they lost Rs 242.2 crore, according to RBI’s trends and progress report. The operating profits of these banks also remained negative, with…

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