Paytm to apply for a Small Finance Bank Licence

The Paytm Payments Bank, promoted by Vijay Shekhar Sharma, will apply for a Small Financial Bank (SFB) license from the Reserve Bank of India (RBI)  by June. 

According to sources, Paytm applying for the SFB licence will be coinciding with completing five years of existence. It can apply for the license around May-June in the upcoming financial year. 

SFB is an independent segment of the banking industry founded by RBI, primarily serving small and medium-sized enterprises, small and marginal farmers, micro and small industries, and unorganized enterprises. Like other commercial banks, such banks can perform all basic banking operations, such as lending and receiving deposits.

Paytm Payments Bank started its operation on May 23, 2017, and is eligible to apply for a small financial banking license by June. Vijay Shekhar Sharma, Chairman of  Paytm Payments Bank, held a 51% stake in the company.

According to analysts, the conversion into a small finance bank of Paytm Payments Bank will enable the company to build a sustainable business model. Current norms only permit payments banks to accept deposits of up to Rs 12 lakh per person. Such entities are not allowed to lend and need to form partnerships with non-bank lenders and others to originate and source loans. Currently, Paytm Payments Bank’s partners include HDFC, Aditya Birla Capital, Hero Fincorp and Fullerton.