While a payments bank cannot access the call money market or the interbank line, a scheduled bank can
Mumbai: Paytm Payments Bank on Thursday said that it has received the ‘scheduled bank’ status from the Reserve Bank of India.
While a payments bank cannot access the call money market or the interbank line, a scheduled bank can. Call money market refers to the market for extremely short period loans, say one day to fourteen days. Banks with ‘surplus’ lend to other banks with ‘deficit funds’ in the call money market. Thus, it provides an equilibrating mechanism for evening out short-term surpluses and deficits.
Commercial banks can quickly borrow from the call market to meet their statutory liquidity requirements, maximize their profits easily by investing their surplus funds in the call market during the period when call rates are high and volatile.
“Being a Scheduled Payments Bank, Paytm Payments Bank can now explore new business opportunities. The bank can participate in government and other large corporations issued request for proposals (RFP), primary auctions, fixed-rate and variable rate repos, and reverse repos, along with participation in Marginal Standing Facility. The bank would now also be eligible to partner in government-run financial inclusion schemes, the company said in a press release.
However, a payments bank cannot lend and that restriction would remain.
The bank has been included in the Second Schedule to the Reserve Bank of India Act, 1934. As per the Act, banks satisfying the RBI that its affairs are not being conducted in a manner detrimental to the interests of its depositors, are included in the second schedule.