Even after many years of hardwork of Indian government, there are almost 60 crore people in our country about the banking facilities. They never save their money in bank. Most of these people belongs to rural area or worked in unorganised sector in urban area. Most of the migrant labour were also not aware about the banking system.
Reason for these banks
Due to this many govt facility like direct bank transfer and other schemes also did not play any rule to improve their life. To touch these people govt started payments bank to improve financial literacy among the backward citizen of the country.
In 2017, RBI gave license to Airtel Payments Bank, Paytm Payments Bank along with the Fino Payments Bank. In this article we will know the business model of these payment bank. We will also discuss how it is different from normal bank. At last we will know that should we invest in this IPO of payment bank or not.
Fino Payment Bank facilities
Let us know about the Fino Payment Bank first. This bank is growing fintech banking company which give diverse facilities to their customer. They give the facility of current and saving account, debit card and sometimes it give open bank facility like Neo Bank. It also gives third party products like loan, insurance, bill payments etc.
As other private banks already grabbed the most of the urban market already this type of payment bank mainly focus on rural areas. The core strength of the Fino Bank rely on its DTP framework which is Distribution Technology and Partnerships in the untapped areas of banking sector. Distribution helps to reach more customers, technology helps to make their app more user friendly, by partnership they can grow faster.
Positive sides
The good things about this payment bank that their management team is highly experienced. This bank also backed by big names like LIC, ICICI, BPCL, INTEL etc.
Negative sides
The major setback for this type of campany is that RBI gave license to work only in particular sector. So they impose various restrictions on these companies. First of all they can`t take more than one lakh rupees in their saving account. Secondly they have to invest more than 75 % depositories to only govt securities. They have only 25 % rupees to invest in their own will. So it can not generate as much profit as normal bank can.
One more risk with these types of companies are that they can get out of the market quickly. RBI gave license to 11 companies to operate this type of payment bank. But now only 6 of them are functional. This happen due to their low profit margin.
Present situation
At present Fino payment bank is getting more profit than previous year. Only in 2021 its return on asset ratio become positive. But this company maintain its capital adequacy ratio quite well. But this bank has quite low market share than its peer Paytm/India post/Airtel payments bank.
The motive for the IPO of this company is that it want to enter in tier 1 city with the capital and getting profit for the listing gains. The issue prize is 1200 crores in which 900 crores are offer for sale. This IPO is opening on 29 th October and will closed on 2 nd November.
Final words
At last let describe whether we should subscribe or not in this company. See, RBI started this payment banks in quite good manner and its motive was also very good. But the restrictions from RBI hampers the profit margin of these companies. 5 of the 11 payment banks are already out of the market. So investing in this company may get very risky.