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Airtel Payment Bank – How is it different from a conventional bank?

Airtel became the first payment bank to be operational in India. RBI has announced licenses for 11 entities in July 2015 as payment banks. Airtel started its operations from Rajasthan through its customer support center’s Airtel Express. Airtel will spread the operations, phase by phase to pan India by March 2017.

What are Payment Banks?

RBI has formed a committee headed by Nachiket Mor in September 2013, for recommendations to ease banking system and make banking system more convenient. Recommendations included formation of “Payment Banks”.
Payment banks work similar to banks, but without assets. Payment banks were authorized to take deposits, but restricted from giving loans. Initially payment banks can take maximum of Rs.1 Lakh as deposit from a customer. The limit will be revised after 18 months of operations.


Key Takeaways:

1.     Any individual with Aadhar number can open a payment account, even if the customer is not an Airtel Subscriber.

2.     Account enrollment being paperless, customer need to provide Aadhaar number with finger prints to open an account.

3.     Account will be opened within an hour based on the facility limitations.

4.     Payment banks can issue ATM, Debit cards for withdrawal of money. But, Airtel Payment bank initially abstained from issuing them.

5.     Max limit of Airtel payment bank is Rs.1 Lakh. Deposits and withdrawals can be done from any Airtel Express showroom. Currently operational only in Rajasthan.

6.     Current accounts along with savings accounts can be taken.

7.     Airtel payment bank provides 7.25% interest rate on deposits which is very high compared to conventional banks. Most of the Public sector banks pegged interest rates to 4%, which private sector banks like kotak offering 6% with deposits more than Rs.1 lakh.

8.     Loans and credit cards are restricted to be issued from payment banks.

9.     11 firms were announced eligible as payment banks out of 41 applicants. Out of these, three have surrendered their licenses. First one being "Chalomandalam Distribution Services", then "Dilip Shanghvi, Sun Pharmaceuticals" and the latest, "Tech Mahindra".

List of entities with payment bank license:

1.   Aditya Birla Nuvo

2.   Airtel M Commerce Services

3.   Department of Posts

4.   FINO PayTech

5.   National Securities Depository

6.   Reliance Industries

7.   Vijay Shekhar SharmaPaytm

8.   Vodafone M-Pesa