Airtel Launches India’s First Payments Bank

Airtel Payments Bank Ltd. has become the first payments bank to start operations, offering services in Rajashtan in a limited scale. As per declaration of the bank, customers will be offered an interest rate of 7.25% on deposits in savings account, higher than the 4-6% commercial banks are offering and the pilot will run at 10,000 Airtel retail outlets where basic banking services will be provided. Airtel Payment Bank is planning to expand its merchant net-work in Rajasthan to 100,000 by the end of the year.

 Bank accounts can be opened by customers without documents using Aadhaar based e-KYC. The subscriber’s mobile number would function as a bank account number and transfer from Airtel to Airtel phone numbers would be free.

 The bank is not offering any debit card facility right now. The bank was the first applicant to receive the final license from the Reserve Bank of India (RBI) in April. Kotal Mahindra Bank holds 19.9% in the Airtel Payments Bank.

 The retail outlets, which will act as banking points, will offer account opening services, cash deposit and withdrawal facilities. As a payments bank it cannot perform lending activities, except while giving loans to its employees on approval of the board. The bank can, however, accept deposits of as much as Rs. lakh.

 According to RBI guidelines issued in November 2014, a payments bank will maintain cash reserve ratio with the central bank. Apart from it, the will be required to invest minimum 75% of their deposits in statutory liquidity ratio eligible government securities with maturity up to one year and hold maximum 25% in current and time deposits with other scheduled commercial with other scheduled commercial banks for operational purposes and liquidity management, the guidelines said.

 It may be recalled that in August last year, the central bank had given in-principle approval to 11 applicants to set up payments bank by February 2017. Out of the 11 applicants, Cholamandalam Investment and Finance Co., Tech Mahindra Ltd. and billionaire Dilip Shanghvi have already given up their approvals. 

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