RBI hikes payments bank deposit limit to Rs 2 lakh from Rs 1 lakh

In a move aimed at boosting the adoption of digital payments in the country, the Reserve Bank of India (RBI) upped the end of day balance for payment banks to Rs 2 lakh from Rs 1 lakh.

This decision could help payments banks — which are essentially electronic bank accounts that allow only savings deposits and not fixed or recurring deposits — cater to more people in the country, as well as help them access many other financial products they offer such as insurance, wealth management, etc.

"Based on a review of the performance of payments banks and with a view to encourage their efforts for financial inclusion and to expand their ability to cater to the needs of their customers, including MSMEs, small traders, and merchants, it has been decided to enhance the limit of maximum balance at end of the day from Rs 1 lakh to Rs 2 lakh per individual customer," the Indian central banking authority said in a statement.

Payments banks offer interest rates similar to those offered by banks. They're currently barred from giving loans and advances as per RBI norms.

"The announcement of 'Payments bank deposit limit doubled by RBI' is a welcome move after a long and hard fight by the payments bank. While the limits they expected were much higher, I hope this 100 percent increase will help boost the payment banks access to a greater client network and improve digital transactions across the country," said Anil Pinapala, Founder and CEO, Vivifi India.

Payments banks first came into being in 2015 when the RBI gave 11 entities approval to launch such a service. Some popular names include Paytm Payments Bank, Fino, Airtel, and India Post Payments Bank, among others.

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The RBI also gave permitted digital payments players to use NEFT (National Electronic Funds Transfer) and RTGS (Real-Time Gross Settlement) to facilitate payments. Only banks had been allowed to use these services so far.

"The decision... is a welcome step and will enable us to cater to the growing needs of our customers. Similarly, the increase in the current limit on the outstanding balance in full-KYC PPIs from Rs 1 lakh to Rs 2 lakh will incentivise migration to full KYC PPIs, which will further bring financial inclusion across the country. We support an open and interoperable digital payments ecosystem, and are looking forward to the detailed guidelines on this subject," said Satish Gupta, MD and CEO, Paytm Payments Bank.