Mumbai: The Reserve Bank of India (RBI) had given licences to 11 entities to form payments banks, but three withdrew. Others that are set to launch services include Paytm, Department of Posts, Reliance Industries Ltd and Aditya Birla Nuvo Ltd.
Payments banks can’t lend; they can only take deposits. On 2 December, Airtel Payments Bank announced it would give free talktime to customers—1 minute for every rupee deposited in a savings account with it. Shashi Arora, the company’s managing director and chief executive officer, spoke to Mint about the launch of the payments bank and its products. Edited excerpts:
What are the products you are currently offering as a payments bank?
Payments bank has a limited approach, mostly focused on banking services. We are offering 7.25% interest on savings accounts. All customers will be taken on board through e-KYC (electronic know-your-customer). It can be done either through Aadhaar number, where we verify based on biometric verification, and via permanent account number (PAN). With PAN, we do one more level of check.
We are giving the mobile number as the account number to our Airtel customers. For other telecom customers, we are giving a sequential 10-digit account number. There is no limit on withdrawal or deposit. Cash withdrawal and deposit is possible at the retail outlet. Also, you don’t need a debit card for cash-out or cash-in, since it uses biometrics. We are also giving a free personal accident cover of Rs1 lakh to our savings account customers, through a tie-up with Bharti AXA General Insurance Co. Ltd.
As per RBI guidelines, we can’t directly lend to customers. We can offer a loan as a referral service from another non-banking finance company (NBFC) or from other companies. We can’t offer fixed deposits either.
As of now, there is only one product—savings account. Our approach is to keep it simple.
How do you provide banking services?
There are still about 233 million unbanked people in this country. Airtel has 250 million customers, out of which over 90-95% are prepaid customers. This is the customer segment that clearly gels well with what a payments bank would reach out to. We have a deep distribution network through 1.5 million retail outlets—the telecom recharging shops.
We offer banking services through this retail infrastructure. It is a different way of operating than a conventional bank in India. It is logical for the telecom recharging outlets to do this biometric-based business. Initially, we are focused on these retail outlets, which is still a big number for the simple reason that the customer is still used to going to these outlets for a recharge.
Does the bank provide all electronic transactions like a regular bank?
After we became a bank, the money in the bank got electronically linked to the entire banking channel. Hence, we have National Electronic Funds Transfer (NEFT), Real-time Gross Settlement System (RTGS) and Immediate Payment Service (IMPS).
Once a customer opens an account, it is electronically accessible. In comparison, e-wallets have some limits. In the coming month, we will integrate with the Unified Payment Interface (UPI). Since we are a bank now, we can use all new features that are developed by the National Payments Corporation of India (NPCI) or RBI. You can transfer money from any bank account in the country electronically. You can use the money to pay mobile bills, DTH recharges, and make online and offline payments. The accounts can be accessed without smartphones as well.
How are you offering one of the highest interest rates on savings accounts?
We are offering a high interest rate to build a customer base as early as we can. The objective of the central bank and the government is to get more customers in the formal banking fold. We are also on-boarding many merchants—kirana stores, chemists, stationery shops, mom-and-pop stores—so that customers also find it easy to pay digitally to these merchants.
Why did you start with Rajasthan and by when will you go pan-India?
We started with 10,000 retailers in Rajasthan. We will expand as our user base increases in Rajasthan and beyond. We chose this state as it has a good mix of urban and rural geographies. It is vast, has remote areas and high density urban geographies as well. It gives a flavour of both urban and rural.
A customer can open an account in Mumbai or other regions but cash-out and cash-in is not possible right now anywhere else other than Rajasthan. But it is not going to take too long for us to go pan-India. As of now, we have crossed 20,000 accounts.
As a payments bank, you can’t give loans, but you can give through a third party. Are you looking to offer loan products?
We are not looking at venturing into any loan, overdraft or credit at the moment. We can also offer insurance, mutual funds and pension products directly. But we are not offering anything other than savings account; we will look at these as we go forward. Right now, we want to get our banking services pan-India and work towards digitising, which means including over a 2 million merchants to the system. Once that is done, we will focus on other products.