Payments banks end of the day balance

Payments banks end of the day balance

Subject: Economy

Context: Payments banks (PBs) want the Reserve Bank of India to raise the maximum end of the day balance a customer can maintain with them from ₹2 lakh to ₹5 lakh in sync with the increase in the deposit insurance cover.

Concept:

• PBs executives feel an enhancement in the limit will be opportune as the Deposit Insurance and Credit Guartee Corporation (DICGC) has increased the deposit insurance cover fivefold to ₹5 lakh.
• DICGC insures bank deposits such as savings, fixed, current, and recurring ones. Previously, under the Guidelines for Licensing of PBs, these banks could hold a maximum day-end balance of ₹1 lakh per customer. This was in line with the then deposit insurance cover of ₹1 lakh.
• The deposit insurance cover was raised to ₹5 lakh, with effect from 2020, the maximum balance a customer can hold in a PB at the end of the day was not increased.
• The RBI had doubled the maximum balance a customer can hold at end of the day in a PB to ₹2 lakh
• Micro, small and medium enterprises (MSMEs), small traders and merchants can benefit if limit is enhanced to ₹5 lakh.
• CASA pool Further, this can also increase PBs pool of low-cost current account, savings account (CASA) deposits.
• PBs are niche banks that leverage technology for financial inclusion and are aimed at small businesses and low-income households.