Why Are Payment Banks Important?

Payment banks are banks which will offer selected services as compared to full fledged banks. A payment bank can only receive deposits and provide remittances. It cannot carry out lending activities. This type of bank is targeted at migrant labourers, low income households, small businesses, and other unorganised sector entities to to help India reach its financial inclusion targets. These banks have to use the word Payment Bank in its name which will differentiate it from other banks.

While Airtel has launched its services, other players like Paytm, FINO PayTech and Aditya Birla Idea Payments Bank are looking to launch theirs by early 2017.

IndiaPost has become the third entity to receive a final license from the Central Bank to start its payment bank operations. Country’s largest telcom service provider Bharti Airtel and digital payments firm Paytm are the other two to have received the license while only Airtel has started operations so far. Operations are expected to start before March 31 and will be gradually rolled out in 650 districts using the network of 1.54 lakh post offices.

Airtel Payments Bank offers 7.25% interest on deposits in savings accounts. Large commercial banks such as State Bank of India and ICICI Bank Ltd offer 4% . Some banks offer interest on savings account in the range of 5.5-7.1%, depending on the deposit amount.

Airtel Payment Bank

Finance minister Arun Jaitley formally launched Airtel Payments Bank Ltd on Friday in New Delhi. A joint venture between phone services provider Bharti Airtel Ltd and Kotak Mahindra Bank Ltd, the payments bank went live with a network of 250,000 banking points. In the pilot phase, the bank added over 1 million customers.

Airtel Payments Bank offers 7.25% interest on deposits in savings accounts. Large commercial banks such as State Bank of India and ICICI Bank Ltd offer 4%. Some banks offer interest on savings account in the range of 5.5-7.1%, depending on the deposit amount.

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