NEW DELHI: Airtel Payments Bank, the first telecom player-run bank to commence operations in the country on Thursday, is promising an interest rate of 7.25 per cent on deposits in savings accounts.
But it would charge a fee of 0.65 per cent on all cash withdrawals from the account.
The bank — a joint venture between Bharti Airtel (80.1 per cent) and Kotak Mahindra Bank (19.9 per cent) — will invest ₹3,000 crore to build a pan-India banking network enabling customers to mainly operate accounts from their phone, according to an official statement.
The bank will allow transfer of money to any bank account in India at a cost, but money transfers from an Airtel number to another Airtel number within the Payments Bank will be free. Airtel’s payments bank will look at tapping its over 250 million telecom subscriber base.
All customers’ mobile number will double up as their bank account number and in a bid to woo customers, Airtel is offering one minute of telecom talk time for every rupee deposited at the time of opening an account as well as free personal accidental insurance of ₹1 lakh with every savings account.
Bharti Enterprises Chairman Sunil Bharti Mittal said, “Airtel Payments Bank aims to take digital banking services to the unbanked over their mobile phones in a quick and efficient manner. Millions of Indians in rural areas will get their first formal banking experience with Airtel Payments Bank.”
The Airtel Payments Bank will be operate across all states, and will leverage its vast telecom retail network. Initially, it will have 250,000 banking points, which will be scaled up to 600,000 in the current year. The accounts will be opened using e-KYC for which customers’ Aadhar number will be required.
“There are about 1.5 million individual stores that people go to for getting their prepaid recharges. Of these we will be enabling 0.6 million this year,” Shashi Arora, MD & CEO at Airtel Payments Bank told The Hindu.
“The advantage is that it is easier for them to understand how a banking thing works because till yesterday they were doing recharges using their phone and accepting cash…Only new leg is cash withdrawal, which is a reverse process. In this case customers’ account gets debited and his gets credited,” he said.
With majority of mobile phone users in rural area still using a feature phone, the bank has rolled out USSD short code for account holders to carry out banking transactions.
“There are no charges for USSD transactions or to check balance and depositing money into the account. The only charge there is, is when a customer makes a physical cash withdrawal. For this, we will charge them 0.65 per cent,” Mr Arora said.
A customer will be able to withdraw cash only at the banking retail points. The bank will not offer debit cards to customers.
Asked about the charge for cash withdrawal, Mr Arora said, “Retailer is providing services at both legs – while depositing cash as well as withdrawal. While we don’t charge for depositing of money, we still have to pay the retailer. We have to feed the commissions in the entire chain… which is how we have arrived at 0.65 per cent.”
He added that this will also push account holders towards cashless transactions.
Airtel Payments Bank is also signing up merchants to use its mobile application built for them, which will allow them to take payments from the bank’s customers and transfer it to their account in any bank free of charge. Already one million merchants are on board and the bank has set a target to sign up 5 million merchants by the end of this year.
“If customer swipes a card to make payments, as a merchant, I pay one per cent charge on debit cards and 2 per cent on credit cards. There is also a cost for PoS machine. Now, merchants can download the application and can start accepting payments without any fee,” Mr Arora said.
The payment bank, which received final approval from Reserve Bank of India (RBI) in April, launched a pilot of its operations in Rajasthan in November.
While 11 applicants were granted in-principle licence for payments bank, three dropped out. Airtel was the first one get to a final approval from RBI, followed by Paytm founder Vijay Shekhar Sharma. Paytm is expected to commence operations by next month from Noida in Uttar Pradesh. Remaining applicants, including India Posts, Vodafone India, Idea Cellular, are yet to receive the final nod.
Payments Bank cannot offer full fledged banking services. They are restricted to holding a maximum balance of Rs. 1 lakh per individual customers and they cannot offer loans. They are however allowed to issue ATM/debit cards and other prepaid payment instruments, but not credit cards.
These banks can also distribute non-risk sharing simple financial products like mutual funds and insurance products.
In contrast to mobile wallets, payment banks can give interest rate on savings deposit. Also, users need to pay a charge between 1-4 per cent to transfer money from their wallets to their banks accounts. Paytm, which will soon launch their payments bank, has announced that there will be no charge for transferring money from Paytm wallet to Paytm Payments Bank.
(EOM)
