Payments Banks in India: Know Its Features & Interest Rates

People are using traditional banks for a long time. But now, there are a few banks that are known as payments banks. You might also hear about them in various television commercials such as Airtel, Paytm payments bank, etc. Most of you have various questions in your mind about how these payments banks work, how you can create a savings or current account or how you can get benefit from them. That’s why, in this article, we are going to break down each and every single detail about payments banks in India.

payments-bank

What Is A Payments Bank?

Basically, payments banks are a new model of banks which was conceptualized by the Reserve Bank of India back in 2013 to 2015 time frame. After creating the whole concept, RBI released the draft guidelines and waited for the comments of interested entities and normal users.

Finally, in 2015, a total of 41 entities applied as they were interested in creating this new type of banking system under their new or existing brand name. After that, the Reserve Bank of India gave licenses to eleven entities to start their own payments banks once the entities accepted the terms and conditions given by the RBI. A few of them are Paytm, Airtel and Vodafone.

How Do Payments Banks Work?

The business and working model of payments banks are very different from traditional banks. The huge difference between them is, that payment banks cannot offer any loans and credit cards to their users. And because of that, they can not earn any interest by giving loans to people. Instead of that, they run their business by investing in government bonds, collecting fees from remittances and providing various services to its users such as utility payments, mobile recharges, dish recharges, bus, train, and flight bookings, etc. They can also cross-sell services such as insurance and loans by partnering with other financial institutions and earn money on a commission basis.

Payments banks actually earn very less from each person who is using their services. But, as soon as their user base grows, they will start earning more by selling user data such as user’s banking and usage patterns to other companies and by charging a specific fee or commissions from merchants who will accept payments from customers done via the payments banks.

Benefits Of Using Payments Banks

There are a handful of benefits you will get if you use payments banks. Below, you can clearly see how beneficial is payments banks compared to traditional banks:

Zero Balance

Nowadays, none of the traditional banks let you keep your account balance zero. All of them charge a fee when your account balance is below the minimum balance level. But, there are no such conditions that apply to payments banks. You can have a payments bank account with zero balance, and it will still be valid, and no fee will be charged for that.

Maximum Interest Rates

I have already mentioned about this at the beginning of this article that traditional banks offer around a 3.50% interest rate per annum. But, payment banks can give you up to 7.25% interest per year. Apart from that, Paytm and some other payments banks also give you interest on a monthly basis which is very rewarding.

Availability Of Outlets

Traditional banks have a limited amount of branches in each city and to deposit cash or to withdraw money from banks, customers need to go through a long queue. But as most of the payments banks in India are run by the telecom operators, they already have a large number of retail outlets in each city. So, it is very convenient for users to go to their nearest retail outlet and deposit or withdraw money from their payments bank account.

Security

These banks are also secure and safe to make transactions.

Mobile No is your Account No

This is another benefit where you get the same mobile number as your bank account number. It makes your account number unforgettable.

Exclusive Offers & Cashbacks

Yes! When you are using a payments bank, you will also receive a lot of cashback offers and discounts from different merchants where you can make payments using your payments bank and enjoy the offered benefits.

Other Benefits

Apart from all these benefits, you will also get some cheap accidental insurance policies and other additional benefits by using these banks. You can use it as your pocket wallet and keep a small amount of money to spend on a daily basis without risking your whole bank balance.

How To Create Savings Account In Payments Banks?

Creating a savings account in payments banks is very easy and simple compared to traditional banks. Here you can even do all the things digitally. I am going to describe the process of creating a savings account in Paytm payments bank. Other payments banks offer a very similar process.

  • First of all, download the Paytm app from Google Play Store.
  • Tap on the Savings Bank Account icon from the app.
  • Read all the terms and conditions and proceed.
  • Now, set a four-digit passcode to secure your account.
  • Now add a nominee and fill in other required details.
  • For Paytm KYC verified users, the savings account will be opened within a few minutes.
  • For non-KYC verified users, enter the required documents for KYC such as your address, Aadhaar Card, Voter ID, Passport, etc.
  • Once you submit the required details, a representative from Paytm will visit you at your given address to complete the verification of your given documents.
  • Finally, after that, your savings account will be ready.

Interest Rates In Payments Banks

Interest rates in payments banks are far better than the traditional banks such as State Bank Of India, HDFC, ICICI, Axis Bank, Canara Bank, etc. SBI currently offers only 3.50% interest per annum for savings accounts whereas most the payments banks provide more than that. On top of that, many payments banks including Paytm pay you interest on a monthly basis whereas SBI pays you quarterly.

List of Payments Banks in India

Below, you can see a list of major payments banks available in India with their interest rates per annum. These rates are offered currently at the time of publishing this article. But, they may vary from time to time.

  • Airtel Payments Bank: 4%
  • Paytm Payments Bank : 4% for Savings & 7% for Fixed accounts.
  • Fino Payments Bank: 4%
  • India Post Payments Bank: 4.5%
  • Jio Payments Bank
  • Aditya Birla Idea Payments Bank

These were the various things related to payments banks in India. Now, what do you think? Are these better than the traditional banks? Or both are essential for us? Let us know your thoughts in the comment section below. Also, don’t forget to share this article with your friends.

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