Bharti Enterprises Chairman Sunil Bharti Mittal launched India’s first payments bank – Airtel Payments Bank – giving a 7.25% interest on savings accounts, which makes it the highest interest rate on offer.
Most public sector banks, flush with deposits now, offer 3-4% interest on savings deposits, while a few private sector banks go up to 6%.
Besides the lucrative interest rate, the bank also offers personal accidental insurance of Rs1 lakh with every savings account and free talktime equaling the amount deposited in the payments bank-saving account.
The fully digital and paperless bank aims to take basic banking services to the doorstep of every Indian by leveraging Airtel’s vast retail network.
Airtel Payments Bank (APB) is a 80:20 joint venture between Bharti Airtel Ltd and Kotak Mahindra Bank Ltd.
With the launch, over 250,000 Airtel retail stores across the country would double up as banking points. The plan is to scale up to 600,000 banking points by the end of the year.
From these points, customers would be able to open savings accounts, and deposit and withdraw cash. The platform that will connect 100 million Airtel customers, is aiming to add 25,000 accounts per week.
The country’s largest telecom operator launched the first pilot of its payments bank at its 1,000 outlets in Rajasthan in November 2015. It has already added one million customers during its pilot phase.
In the initial period, Airtel Payments Bank will not charge any processing fee from its customers and merchants partners for digital transactions, in a bid to encourage them to adopt cashless payments.
The company would develop a nationwide merchant ecosystem of over five million partners including small kirana stores, grocers, pharmacies, restaurants, etc. These merchant partners will accept digital payments from Airtel Payments Bank customers over mobile phones.
RBI Norms on Payment Banks
The newly launched bank has committed an initial investment of Rs 3,000 crore to further develop a pan India banking network and digital payments ecosystem.
As per current RBI norms, the promoters have to keep a minimum 40% stake in the payments bank in the first five years. Foreign shareholding is allowed in these banks as per the rules for foreign direct investment in private banks in India.
Private-sector lender Kotak Mahindra Bank owns a minority stake in Airtel Payments Bank.
RBI had granted in-principle nod to 11 payments banks in August 2015 to bring financial services within the reach of millions who still lack access to formal banking. Payments banks can take deposits and remittances but are not allowed to lend.
Airtel Payments Bank got the license in April 2016 and became the first among such niche banks to start operations.
Other telecom players that have payments banks licences include Reliance Industries (Jio), Vodafone and Idea Cellular.
About Payment Banks
A payments bank is fully digital and customers can access services over mobile phones, including all feature and basic mobile phones. It offers basic banking including account-opening services and cash deposit and withdrawal facilities. Savings accounts are opened using Aadhaar-based e-KYC. This requires no documents and only the customer’s Aadhaar number is needed. However, deposits only up to Rs1 lakh can be made.