Moving closer to the industry average, Airtel Payments Bank has cut its savings account rates from its introductory rate of 7.25% to 5.5%. Payments Banks can accept deposits up to Rs 1 lakh and can make and receive payments. However, they cannot give out loans. Airtel Payments Bank was launched in January 2017 as India’s first payments bank. Telecom rival Idea has also launched Aditya Birla Idea Payments Bank on Feb 22nd, 2018.
How Payments Banks work
Payments Banks can offer savings and current accounts as well as debit cards. Many of them have tied up with ordinary banks to offer fixed deposits and ATM withdrawal services. However, they typically impose charges for withdrawals at ATMs or bank branches. Payments Banks cannot give loans. They can instead make money by selling loans, insurance and mutual funds offered by other institutions. In a recent move, the government has also permitted them to offer Atal Pension Yojana (APY).
Companies such as Paytm have shifted their wallets to their Payments Banks. In other words, your Paytm wallet is now part of Paytm Payments Bank. However unless you specifically apply for a payments bank account, your Paytm wallet remains a ‘wallet’ with the bank and earns no interest. Here are the rates offered by other major payments banks in India:
|Bank||Savings Account Interest Rate|
|Airtel Payments Bank||5.5%|
|Paytm Payments Bank||4%|
|Department of Posts||5.5%|
These rates are close to or the same as the savings account interest rates offered by ordinary banks. SBI currently offers an interest rate of 3.5% for deposits up to 1 crore while ICICI offers 4%.
Airtel Payments Bank controversy
The Unique Identification Authority of India (UIDAI) suspended the Aadhar e-KYC license of Airtel Payments Bank and Bharti Airtel (the telecom company) in December 2017 for allegedly opening accounts for customers using their Aadhaar based e-KYC details without their informed consent. These accounts had also allegedly received Government LPG subsidies. This is also alleged to have been the reason for the resignation of the Managing Director of the Payments Bank. The UIDAI subsequently provided conditional approval to Bharti Airtel to conduct e-KYC but maintained its suspension on the e-KYC license of Airtel Payments Bank.