(Source: BloombergQuint)

What India’s Payments Banks Offer

Paytm on Tuesday became only the third company to launch a payments bank though the Reserve Bank of India has granted in-principle nod to 11 entities.

Vijay Shekhar Sharma, founder and chief executive officer of Paytm, is looking to cash in on the company’s digital wallet ecosystem and offer multiple services to make it work.

It is difficult for a standalone player without a platform to start and run a payments bank, Satish Meena, senior forecast analyst at Forrester Research, said. “To run a payments bank, it is important to have multiple layers of offerings, the ecosystem of merchants like Paytm, and a platform where you can offer things like financial services on top of it. This is one of the reasons we are seeing lacklustre interest from other players.”

Three of the 11 entities that received RBI approval – Cholamandalam Distribution Services Ltd.; Dilip Shanghvi, promoter of Sun Pharmaceutical Industries Ltd.; and Tech Mahindra Ltd. – have dropped their plans to launch payments banks. Meena said others too may either drop out or delay launching operations.

A payments bank can accept deposits of up to Rs 1 lakh per customer in a savings or current account, and offer other services such as debit cards and online banking. However, it cannot advance loans or sell credit cards.

Apart from Paytm, Bharti Airtel Ltd. and India Post have launched payments banks. BloombergQuint compares their services and charges…

Interest Rate

Airtel Payments Bank offers 7.2 percent, the highest interest rate on deposits, followed by India Post which offers up to 5.5 percent. Paytm offers the lowest rate, 4 percent, in line with large commercial banks like HDFC Bank Ltd., ICICI Bank Ltd. and Axis Bank Ltd.

Interest rate will not be one of the key metrics in getting users on board in a payments bank, Meena said. “Users in urban areas will sign up more wherever there are more use cases for transactions, and not based on interest rates offered. The payments bank which has more acceptance from merchants will see more user traction,” he said.

While Paytm is focused on increasing transactions, Airtel and India Post are mainly banking on rural adoption. “Once Paytm moves to Tier-2 and Tier-3 centres, we might see tweaks in their interest rates,” he said.

Debit Cards

Airtel’s payments bank does not offer a physical debit card, while Paytm will provide RuPay debit cards at an annual subscription cost of Rs 100 in addition to delivery charges. India Post is offering free debit cards, but charges Rs 100 for an add-on card.

In case of loss of card, Paytm will charge Rs 100 plus delivery charges. The bank is also providing a cheque book at Rs 100, plus delivery charges, for 10 cheque leaves.

India Post charges an annual maintenance fee of Rs 100, which is applicable from the second year onwards. In case the ATM kit or ATM card is returned due to a wrong address, the customer will have to pay Rs 100 as replacement charges.

Online Banking

Paytm’s payments bank will provide free online fund transfer services such as Immediate Payment Service (IMPS), Unified Payment Interface (UPI) and National Electronic Fund Transfer (NEFT).

India Post will charge a fee if the transaction happens at the branch. NEFT will cost Rs 2.5-5 per transaction, while an IMPS transaction will cost Rs 5. For mobile banking, NEFT is free but IMPS is charged at Rs 4 per transaction.

Airtel charges 0.5 percent of the amount if funds are transferred to another bank account through internet banking, mobile app or Unstructured Supplementary Service Data (USSD). Within the bank, fund transfers are free.

Cash Withdrawal Charges

Paytm’s payments bank users will get five free transactions in non-metro cities and three in a metro, after which they will be charged Rs 20 for each cash withdrawal and Rs 5 for non-financial transactions like taking out a mini-statement. For a physical statement, customers will have to pay Rs 50 plus delivery charges and service tax.

Airtel will levy 0.65 percent of the amount for a withdrawal from a banking point.

India Post will not charge any fee for withdrawals at its own or Punjab National Bank ATMs. However, for withdrawals from other banks’ ATMs, users will get five free transactions per month in non-metros and three in metros. Beyond that, it will charge Rs 8 and Rs 20 per transaction, respectively.

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