A study on assessing the financial growth of Payments Banks in India

Abstract

As part of India's broader financial inclusion agenda, RBI introduced Payments Banks as a specialized category of institution which mandated to extend accessible banking services to the underserved and unbanked segments of the population. Five Payments Banks have remained active through most of the period under study, while a sixth licensee, Paytm Payments Bank, operated under escalating regulatory restrictions before its banking licence was cancelled by the RBI in April 2026. These institutions operate under a restricted banking-model and can accept deposits of up to ₹2 lakh per customer and offer a range of payment-related services. Also, these banks are not allowed to advance credit to the customers. This restriction on income generation has caused to record heavy financial losses during their initial years. The present study evaluates the financial performance of Payments Banks in India over a six-year period, from FY 2019-20 to FY 2024-25, on the basis of the consolidated balance sheet, the consolidated profit and loss account, and a set of profitability, efficiency, liquidity and solvency ratios. The findings indicate that, following four consecutive years of losses, these banks recorded its first positive operating and net profit in FY 2022-23, and this improvement has been sustained, albeit at a modest scale, through FY 2024-25. The study also shows a bank-wise account of the current standing of individual Payments Banks. Payments Banks have faced great losses in initial years so their long-term sustainability will highly dependent on proper maintaining proper control over cost, increasing income by diversifying the fee-based income and imposing strict compliances to improve its working.